On Tuesday, December 3, the German index DAX reached another all-time high this year, surpassing the 20,000 points level. The euro plays a ping-pong game with the dollar with the net suspended at 1.05$. Americans have an increasing appetite for cutting interest rates. A handful of data from peripheral markets.
To the moon!
There is an extraordinary rally on the German stock exchange. Contrary to all logical arguments, today we record the fourth consecutive rising session. In this time, the index has travelled 700 points. Yesterday, we managed to reach an all-time high (ATH), today this result was improved again, spectacularly breaking the threshold of round 20,000 points. For a quick reminder, the market tested support at 17,000 in August. And all this happens in a recessionary environment, with terrible moods in the real economy, with the looming threat of Trump’s tariffs. It seems like the best time to remind you of the concept of short squeeze, a situation where a sharp rise in the course does not result from fundamentals, but from excessive closing of previously accumulated short positions on a given asset. Indeed, we have recently seen an increase in such short sales on the German index, and the dynamics of the current move may suggest their panic closing.
Against the euro
After the last good dollar patch, today we are seeing a reaction on the main currency pair. According to previous predictions, the level of 1.05$ proves to be a significant battlefield for both currencies and its permanent overcoming, one way or another, will set the course for the upcoming weeks. Today’s weakness of the dollar results from investors adjusting to the scenario with a more dovish FED policy. The probability of cutting rates at the December meeting already exceeds 70%. Additionally, the market increases its expectations regarding the path of money cost reduction in the next year. Currently, we are talking about cutting by 79 base points (i.e., three FOMC moves). However, considering the recent trends, it is not unlikely that a fourth cut may appear soon. This is still less than on our side of the Atlantic, but the potential spread has recently begun to shrink.
Exotic calendar
Tuesday’s session on the forex market is dominated by commodity currencies. Among the strongest (besides the euro) are the Australian dollar and the Norwegian krone. In fact, if we look at the main market commodities, we can see that they are clearly becoming more expensive today. Oil, silver, and copper are uniformly moving upwards. The Swiss franc also remains relatively strong, which can be linked to inflation surge. The price dynamics in Switzerland rebounded from 0.6% to 0.7% YoY. In the opposite direction, inflation in Turkey surprised, which did fall, but less than the market had expected. Another subtle difference is the level at which the results are suspended. Over the Bosporus, the annual price dynamics is 47.1%. The Hungarians are also not satisfied, where the economy shrank by 0.8% compared to last year. Today, we lack readings from our economy, but tomorrow we will learn the decision on interest rates. The market, of course, does not expect any movements. It is also too early to dramatically change the last RPP narrative. Therefore, tomorrow’s decision should not have much impact on the exchange rate of the zloty.
Author: Krzysztof Adamczak, currency analyst Walutomat.pl
Source: https://ceo.com.pl/dax-na-historycznym-szczycie-euro-i-dolar-walcza-o-dominacje-a-rynki-surowcowe-rosna-38846
