DAX rises as German GDP is revised higher – Daily Market Brief, August 25, 2022

The DAX is gaining for a second day after Q2 GDP was upwardly revised to 0.1%. German IFO business climate survey is due next and is expected to continue falling.

·         Jackson Hole Symposium begins, markets brace for Fed Powell’s speech tomorrow

·         EUR/USD bounces back up above parity ahead of the ECB minutes

·         US GDP & jobless claims data is due

Trading yesterday was relatively subdued with few prepared to put large amounts of risk on the table ahead of the Jackson Hole. The DAX closed 0.2% higher after three days of losses and the FTSE fell 0.2%, marking its third day in the red.

Wall Street traded in a tight range and booked modest gains, breaking a three-day losing streak. Volumes were low, which is not unusual during the summer months, but caution ahead of the Jackson Hole Symposium, which kicks off today, could also be playing a part.

Federal Reserve Chair Jerome Powell is scheduled to speak on Friday at the event, following the release of the July PCE data. Expectations of a hawkish tone from Fed Powell Chair, particularly in light of the hawkish comments from other Fed officials this week, have been a key driver for positioning.

German GDP

Heading into the European open, the DAX is pushing higher following revision to GDP data. The eurozone’s largest economy grew 0.1% in the April to June quarter, revised higher from 0%. Given the weak PMI data coming from Germany, this will likely be the last quarter of growth for a while.

German IFO business climate survey

Following the German GDP data, German IFO business climate data is due. With the drought in Germany affecting trade up the Rhine, the deepening gas crisis, and inflation heading towards double digits, the business climate is deteriorating. The IFO index is expected to fall to 86.8, its lowest level since the depths of the pandemic in May 2020.

The DAX has risen from the weekly low of 13080, and futures are heading toward 13300 ahead of the open.

ECB minutes

The euro has also found its mojo, jumping back up to parity ahead of the minutes from the latest ECB meeting. The central bank raised interest rates by 50 basis points at the meeting. The market is looking for another 100 basis points of rate hikes from the ECB over the next two meetings. The minutes are expected to show the ECB is increasingly prioritising its fight against inflation, even if that is at the cost of economic growth.

At the time of writing, EUR/USD trades at 1.0020, helped higher by a weaker USD.

US GDP & jobless claims

Looking ahead to the US session, US GDP data will show how the economy held up in Q2. Expectations are for the initial -0.9% reading to be revised a touch higher to -0.7%, which would mean that the US economy is in a technical recession, even if the labour market is still showing strong job creation.

Initial jobless claims fell last week to 250k and are expected to hold steady around this level at 253k this week.

The S&P500 futures trade 0.5% higher at 4180 at the time of writing. It would take a fall below 4100 for the bearish trend to continue.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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