dax-usd
Dax Eyes Record Highs After Closing Gap, As EU Prepares for Trade War
Skerdian Meta•Wednesday, February 5, 2025•2 min read
The German index DAX has closed the weekend bearish gap after the bullish reversal this week, despite a looming trade war with the US, which the ECB is preparing to forerun.
The foreign exchange market saw notable volatility as the US Dollar extended its decline due to the absence of new tariff concerns. Meanwhile, risk assets continued their upward trajectory, with European stock indices posting solid gains for the third consecutive day this week. At the beginning of the week, the German DAX 40 index opened with a sharp bearish gap following Donald Trump’s decision to sign 25% tariffs on Canada and Mexico. However, market sentiment quickly rebounded after news broke that the tariff implementation would be delayed by 30 days, providing a temporary relief to investors. Dax climbed around 150 points, to move above 21,600 points where it closed the session.
Geopolitical Developments and Commodities
Aside from final services reports from Europe, the news flow has been relatively light. However, there have been encouraging signals regarding the US-Iran situation, which previously impacted crude oil prices. Iran’s foreign minister indicated that progress could be made if nuclear weapons remain the primary concern for the United States. Trump later reinforced this stance, stating on social media that he envisions Iran as a “great and successful country” but emphasized that it must not be allowed to develop nuclear weapons. His focus remains on securing a “verified nuclear peace agreement,” which could ease geopolitical tensions.
Gold prices continued to climb, reaching fresh all-time highs as real yields declined. The drop in Treasury yields, exacerbated by yesterday’s weak US Job Openings report, fueled further demand for the precious metal.
Eurozone Outlook and Policy Considerations
Remarks from ECB Chief Economist Philip Lane underscored that the disinflation process remains on track, though the eurozone economy is expected to remain subdued in the near future, based on recent survey data. He suggested that maintaining a balanced policy approach is appropriate at this stage, noting that the neutral interest rate alone cannot fully capture the calibration of monetary policy.
Tariff-related risks continue to pose a potential threat to economic activity, but their precise impact on inflation remains uncertain. With market sentiment driven largely by geopolitics and economic data, traders are watching closely for any shifts in policy direction or unexpected developments that could sway risk appetite in the days ahead.
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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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