Germany’s DAX index hit a new all-time high as investors bet on an upcoming European Central Bank (ECB) rate cut. The ECB is expected to lower rates by 25 basis points, marking its fourth consecutive cut. Policymakers hinted at this move at Davos, citing concerns over weak economic growth rather than inflation.
Despite inflation ticking up to 2.4%, ECB officials believe it will slow to 2% by mid-2025, potentially allowing for more cuts. However, Germany’s economy remains a weak spot, with Q4 GDP shrinking by -0.2%, worse than forecasts. Market focus will be on ECB President Christine Lagarde’s speech, as investors look for hints on policy direction in 2025.
One wildcard remains: U.S. trade policy. A second Trump presidency could bring new tariffs, potentially complicating ECB decisions.
DAX Technical Outlook
The DAX has broken above its long-term trend channel, reaching record levels. However, the Relative Strength Index (RSI) is in overbought territory, suggesting a pullback may be ahead.
- Upside target: 22,000
- Immediate support: 21,000
- Key downside level: 20,500 (December high)
GBP/USD Holds Steady as Markets Await U.S. Data
The British pound (GBP/USD) hovers around 1.2450, showing little reaction to Chancellor Rachel Reeves’ growth plans or the Federal Reserve’s latest policy stance. As expected, the Fed kept rates at 4.25%-4.5%, with Chair Jerome Powell signaling no rush to cut further.
The U.S. economy remains strong, with steady growth, a resilient job market, and lingering inflation pressures.Additionally, uncertainty over U.S. trade policies under a potential Trump administration is keeping the Fed cautious.
Investors are now watching U.S. GDP and jobless claims data, which could shift rate expectations. Economists forecast Q4 GDP at 2.8%, down from 3.1%, while jobless claims may dip to 220,000 from 223,000.
Meanwhile, the Bank of England (BoE) will announce its rate decision next week. The market expects a 25 basis point cut, with hints at further easing. While inflation has cooled, wage growth remains a concern, adding complexity to the BoE’s decision.
GBP/USD Technical Outlook
The pair bounced from 1.21, forming a bullish reversal pattern, but further gains depend on breaking key resistance at 1.25.
- Key resistance: 1.25 (Breakout needed for 1.26 move)
- Support levels: 1.2385 (Falling trendline support), 1.23 (April low)
With central bank decisions and key data releases ahead, both DAX and GBP/USD remain at critical levels, offering potential trading opportunities in the coming days.
