Dollar Dips Yet Germany Still Goes Boom
Yesterday’s market scene: the US dollar kept slumping, even though the ISM services index beat expectations. Worse, Germany swung into a hard sell on its own bonds, sending the market into a frenzy.
What’s on the Horizon
- ECB 25‑bp cut – Ready to cut rates to keep the euro from turning into a carnival ride.
- “Data‑dependent” guidance – Because nobody likes guessing when the next move will be.
Why Germany Is Great Big Money‑Making Itself
Picture the scene: the new Chancellor Merz is whispering about a €500 bn “special” defence fund – a far cry from the earlier €200 bn rumor. That chat alone snapped the Bund prices, pushing 10‑year yields up 25 bp in a single day – the biggest jump since the Berlin Wall fell.
Meanwhile, the DAX popped by more than 3 %, led by defence stocks, and the euro landed new year‑to‑date highs. The market’s getting a little too excited – but remember, spending won’t magically solve Germany’s pains. Still, with the euro above its 200‑day moving average, momentum looks good.
US Growth Still Feels Rough
- The ISM services PMI rose to 53.5, a bit better than expected, but the price index shot up to 62.6 – a sticky sign of stag‑flation.
- No big dollar rally, meaning that good data doesn’t necessarily mean the FX will jump.
- Equities remained nervous, with selling still prevailing even after the Canada‑Mexico auto tariff news.
Both Treasury Secretary Bessent and Commerce Secretary Lutnick appear to be talking down the economy, suggesting a “short‑term pain, long‑term gain” strategy. That could keep the hedges tight and the markets square.
What’s Next?
ECB Day! No excuse for a break. Lagarde will cut the deposit rate again – pushing the “restrictive” label into question. If the description fades, it may signal a slower pace for future cuts.
US Market Watch:
- Weekly jobless claims – no direct tie to the February NFP, but still worth noting.
- Q4 unit labour costs – bump up or down could shift the Fed’s stance.
- Fed’s Waller & Harker remarks – they may hint at what the future holds.
Earnings highlight: Broadcom (AVGO) will report after the close. In a world where AI is suddenly becoming hot and cold, this could swing everything a few points.
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