Euro Outlook, DAX Index, IMF Word Economic Outlook, IMF Global Financial Stability Report – Talking Points
- Euro, DAX index could face selling pressure if IMF outlook spooks European markets
- Coronavirus pandemic threatening to undermine regional financial, economic stability
- DAX index has experienced a recovery but remains down over 20 percent year-to-date
US equity futures aimed higher along with Asia-Pacific stocks in what appeared to be a “risk-on” tilt in investors’ mood. This was also reflected in currency markets where the anti-risk US Dollar and Japanese Yen fell while their growth-oriented counterparts – the Australian and New Zealand Dollars – strengthened. This also followed better-than-expected Chinese trade data.
Euro, DAX May Fall on IMF WEO and GFSR
The Euro and DAX may fall if the International Monetary Fund’s (IMF) World Economic Outlook (WEO) and Global Financial Stability Report (GFSR) reports inspire a selloff in the already-battered currency and index. While Eurozone finance ministers were able to reach an agreement on stimulus, unresolved political rifts may soon haunt the region at a time when it faces a crisis worse than what it had endured in 2008.
Year-to-date, the Euro has fallen almost three percent and is trading at a multi-year low with the German DAX equity index down over 20 percent. The coronavirus pandemic has exposed underlying issues in the Eurozone both financially and economically that are now requiring unprecedented efforts on the part of governments and the European Central Bank (ECB) to address.
The IMF’s assessment – particularly as it relates to financial stability – could inspire a selloff in the Euro and growth-oriented assets in the region if the institution’s outlook undermines confidence in a smooth recovery. Concern about the cross-continental so-called leveraged loan market has stirred investors’ angst in recent months with policymakers warning of another possible regional debt crisis.
The DAX has collapsed to multi-year lows following the virus-induced liquidation across global equity markets in March. The index has managed to clear both layers of former support-turned-resistance between 10381.510 and 10085.480 – gold-dotted lines – with eyes at the range above it. However, if the DAX fails to keep upside momentum robust, the pair may fall back and use 10085.480 as support and linger.
DAX – Daily Chart
DAX index chart created using TradingView
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— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter