DAX 40 Forecast: EU inflation declines – investors hope for interest rate cuts from the euro zone

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DAX 40 Forecast: EU inflation declines – investors hope for interest rate cuts from the euro zone

After the publication of new inflation data in the European Union, the DAX 40 index could rise quickly again in the middle of the week. Low inflation rates are fueling fantasies of interest rate cuts in the eurozone. The release of the US jobs report next Friday will likely continue to cast a shadow.

Core inflation in the euro area fell to 2.9 percent in March

According to preliminary estimates, the EU's core inflation rate was 2.9 percent in March, below expectations (3.0 percent) and below the previous month's value (3.1 percent), data from statistics agency Eurostat show. In this context, investors hope that monetary policy headwinds will subside soon. Markets expect the first interest rate cut by the European Monetary Authority (ECB) to take place in June.
Before that, the European Central Bank will meet on April 11 to decide on the future of monetary policy. An interest rate move is less likely on this day. Policymakers have repeatedly indicated recently that the June date represents the crucial meeting for future monetary policy.

ADP data provides the first taste of US jobs data on Friday

Investors' focus this Wednesday is on the so-called ADP data (2:15 p.m.), the ISM numbers for the services sector (4:00 p.m.) and Fed Chairman Jerome Powell's speech (6:10 p.m.).

National non-farm payrolls may weaken – and wage growth may gain momentum

On Friday (2:30pm) the Non-Farm Payrolls are likely to provide the decisive momentum. Economists expect job growth outside the agricultural sector to slow.
A weak jobs report could fuel interest rate cut fantasies. In turn, investors should also pay attention to wage growth, which could rise compared to the previous month. However, the unemployment rate is expected to reach 3.9%, so there is no change compared to the previous month.