DAX gives away weekly gain as Geopolitical Risks and Tariff Fears Grow

Market Wrap – 21 March 2025

Global Markets

• Global equities are trading the end of the week lower amid rising geopolitical tensions (Israeli airstrikes, Ukraine drone attacks) and renewed U.S. tariff fears under President Trump.
• Safe-haven demand lifted the U.S. dollar and gold, while oil saw its best weekly performance since January.
• Asian stocks dropped, with China underperforming; European and U.S. futures followed suit.
• Japan’s rising inflation raised expectations for further rate hikes.
• Germany advanced a €500B stimulus package, while the UK pursued tighter spending, revealing diverging fiscal approaches.

Central Bank Updates

Federal Reserve (U.S.)

• Held rates at 4.25–4.50%, maintaining forecast for two rate cuts in 2025.
• Inflation slightly elevated, GDP growth outlook upgraded to 2.1%.
• Balance sheet runoff to slow starting April.
• Next meeting: 29–30 April.

ECB (Eurozone)

• Reduced key rates by 25 bps on 6 March, the fifth consecutive cut.
• Inflation forecast for 2025: 2.3%, growth downgraded to 0.9%.
• Policy remains data-dependent, next meeting: 17 April.

Bank of England (UK)

• Held rates at 4.5%, citing uncertainty over U.S. tariffs and domestic stagflation risk.
• Inflation expected to rise to 3.7% by Q3, but two rate cuts still priced in for 2025.
• Markets await next week’s UK spring budget and U.S. tariff details (2 April).

Technical Outlooks

EUR/USD

• Trading near 1.0841, within a bullish range.
• Support: 1.0766
• Resistance: 1.0950

DAX

• In a strong uptrend, despite recent pullback.
• Resistance 1: 23,322 (20 Mar high)
• Resistance 2: 23,480 (18 Mar all-time high)
• Options expiry today ("Hexensabbat") may cause volatility.

Commodities

• Oil: Slight gains, supported by new U.S. sanctions on Iran-linked networks.
• Gold: Eased slightly after hitting record highs.
• Copper: Traded mixed amid China weakness and risk aversion.
• China: To add cobalt and copper to strategic reserves.

Geopolitical Highlights

Middle East

• Israel fired Shin Bet chief, reigniting tensions.
• U.S.-Israel talks on Iran’s nuclear program set for next week.
• Ceasefire efforts in Gaza stalled; White House blames Hamas.

Russia–Ukraine

• Russian drone strikes hit Odesa, Ukraine countered attacks over Kyiv.
• US seeking to renegotiate Ukraine minerals deal.
• EU leaders to meet next week to discuss military aid for Ukraine.
• Russia’s Shoigu in North Korea, meeting Kim Jong-un.

Other Developments

• European states reportedly planning for reduced U.S. NATO presence over the next 5–10 years.
• North Korea tested a new anti-aircraft missile system.
• Heathrow Airport shut down due to fire-related power outage, major disruption expected.

Outlook

Markets remain fragile, driven by:

• Heightened geopolitical risk
• Tariff-related inflation uncertainty
• Cautious central bank stances
• Technical factors (e.g., DAX expiry-related flows)

Traders will watch for:

• UK budget update (27 March)
• U.S. tariff announcements (2 April)
• ECB/Fed signals at next meetings