The DAX Index is steady on Tuesday, trading at 11,995.50 in the European session. In economic news, German Final CPI improved to 0.6%, matching the forecast. German ZEW Economic Sentiment improved to 12.8 points, short of the estimate of 13.2 points. The Eurozone ZEW Economic Sentiment jumped to 25.6, beating the forecast of 19.3 points. On Wednesday, the Federal Reserve is widely expected to raise the benchmark rate to 0.75 percent.
At last week’s ECB policy meeting, several policymakers raised the possibility of higher interest rates. With growth and inflation showing signs of improvement, the ECB has been under pressure to tighten policy and reduce its asset-purchase program. Germany, in particular, is unhappy with the ECB’s ultra-loose policy and on Thursday, German Finance Minister Wolfgang Schaeuble bluntly stated that he wanted to see a "timely start to the exit" from the ECB’s asset-purchase scheme. For his part, Mario Draghi must balance the improved economy with upcoming elections in the Netherlands and France. Euro-skeptics are a strong force throughout Europe and Draghi is reluctant to make any major moves in the middle of heated political campaigns.
More job numbers out of the US, more good news for the economy. Nonfarm payrolls sparkled in February, as the indicator jumped to 235 thousand, easily beating the estimate of 196 thousand. The excellent NFP report make it a virtual certainty that the Fed will raise rates by a quarter-point on Wednesday. Although a rate hike has been priced in by the markets at 93%, there have been disappointments in the past, so a rate move will likely give the dollar a boost against its major rivals, such as the euro. The solid job numbers also give President Trump a much-needed boost. Trump is under pressure to present an economic agenda, but the markets won’t mind giving him some additional breathing room with the economy performing well.