The DAX index is down considerably in the Tuesday session. Currently, the index is trading at 12,478.50 down 0.38% since the Monday close. On the release front, German Preliminary CPI is expected to rebound with a gain of 0.5%. In the US, Jerome Powell will testify before a congressional committee.
German president Angela Merkel received an overwhelming vote of confidence from her conservative CDU party on Monday. Delegates voted to in favor of the coalition with the socialist SPD party. Merkel’s party did poorly in the September election, and has paid the price, as the SPD will receive the financial and foreign affairs posts in the new government. This will allow the SPD to set a more liberal policy regarding Germany’s role in the eurozone, and that could mean a shift away from its conservative and rigorous stance towards budgetary issues, such as support for weaker members of the eurozone. The coalition agreement must still be approved by SPD members, who will vote on the measure on March 4.
All eyes are on Federal Reserve Chair Jerome Powell, who took over from Janet Yellen earlier this month. Powell will testify before the House Financial Services Committee, his first major appearance as head of the central bank. Powell received a rude welcome from the markets just after moving into his new office, as the global stock market correction erased some $4 trillion in valuations. The volatility forced Powell to make a public statement, reassuring the markets that the Fed was closely monitoring the situation.
How will the dollar react to Powell’s testimony before the House Banking Committee? After the recent turmoil in the stock markets, Powell may opt to play it safe and keep away from any splashy headlines, which could lead to more fluctuation in the markets. Powell could choose to focus on the strong US economy and the Fed trimming its balance sheet, and steer away from a discussion of accelerating rate policy in order to head off higher inflation.
