The DAX index continued to show some real strength, as it has been showing for over a week now, despite the political turmoil that we have been seeing in Germany of late. Credit has to be given to the underlying German economy which continues to throw up some strong numbers and this has given confidence to the investors.
DAX Shows Immense Strength
The investors are confident that the German economy would be able to take any kind of a hit as far as its political issues are concerned and the strength in the index is just a thumbs up from the investors that they continue to believe in the economy. Ever since the coalition talks broke down, Merkel has been trying pretty hard to clinch together some sort of a deal to form a coalition and though there has not been much progress in that as yet, a large part of the electorate is still hopeful that she will be able to pull out something.
We also believe that such an eventuality would be ideal for Germany as a whole but it remains to be seen whether she would be able to achieve what she has set out for. If she does not, then it could lead to another round of elections which would add to the uncertainty as it could lead to an even more fragmented vote and this would only complicate the existing situation. Despite all this uncertainty, we have been seeing some strong economic data of late from Germany which has helped to keep the DAX afloat.
Looking ahead to the rest of the day, we do not have any major news from Germany and so expect some more consolidation at the bottom of the range in the short term. Any sort of positive development in the government formation is likely to be treated with a lot of cheer and hence the risk is only to the upside.
This article was originally posted on FX Empire