DAX slips as China posts mixed inflation numbers

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The DAX has lost ground on Wednesday, after gaining close to 1.0% on Tuesday. Currently, the index is at 12,084, down 0.60% on the day. In economic news, there are no major events out of Germany or the eurozone. In the U.S., the focus will be on consumer inflation reports for May. CPI is expected to dip to 0.1%, while core CPI is projected to improve to 0.2%. On Thursday, Germany releases Final CPI and the eurozone posts industrial production.

In China, consumer inflation rose at an annualized rate of 2.7% in May, matching the forecast. However, producer price inflation slowed to 0.6% in May, down from 0.9% in April. As well, Chinese auto sales plunged 16.4% in May, its worst monthly decline on record. This marked a 11th successive decline and comes after a 14.6% drop in April. The soft numbers are reflective of the slowdown which has gripped the Chinese economy, as the bitter trade war with the U.S. shows no signs of easing.

There were fears that President Trump would slap Mexico with new tariffs, opening up another trade war front. The tariffs were set to take effect on Monday, but the U.S. suspended the tariffs, after talks between U.S. and Mexico helped defuse the latest crisis. Although the U.S. has said that the tariffs could be imposed if the illegal immigration crisis continues, investors are pleased that Trump has backtracked. There are also hopes that the ongoing trade dispute between the U.S. and China will ease. At a G-20 meeting, finance ministers agreed on a joint communique to reduce trade tensions. There are hopes that progress towards a trade agreement will be made before President Trump and President Xi of China meet at the G-20 summit in Japan in late June. Risk appetite has improved, and

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Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.

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