DAX, GBP/USD Forecast: Two trades to watch

DAX rises, boosted by defence stocks

Defence stocks rise on EU plan to lift defence spending
Eurozone CPI is expected to ease to 2.3% vs 2.5% in January
DAX rises towards its record high.

The DAX, along with its European peers, has kicked off March on the front foot as it looks back up towards record highs.

Defence stocks are leading the gains after European leaders agreed on Sunday to lift defence spending and draw up a Ukraine plan to present to the United States.

A report that coalition parties in talks to form Germany's new government were also considering setting up a defence fund provided an additional boost.

Top rises on the DAX include Airbus MTU Aero Engineers AG and Rheinmetall.

On the data front, German manufacturing activity was upwardly revised in February, with the PMI at 46.5, up from the earlier reading of 46.1. Whilst this remains in contractionary territory, it does suggest that the contraction is slowing. Eurozone manufacturing PMI was also upwardly revised to 47.6, up from 47.3.

Today, attention will also be on the eurozone inflation data, which is expected to show that inflation is slightly down to 2.3% in February, down from 2.5% previously.

These data points come ahead of the ECB interest rate decision on Thursday, when the central bank is widely expected to cut interest rates by a further 25 basis points to 2.5%.

DAX Forecast – technical analysis

The DAX continues to trade above its multi-month rising channel, recovering from the 22180 low and heading back up towards 22,937 and fresh record highs.

Sellers would need to take out support at 22,180 to create a lower low but the DAX would still remain in the rising channel. Below here, 21,500 and 21,000 come into play. A break below 21,000 would negate the uptrend.

GBP/USD rises as USD safe haven appeal cools

Optimism of a Ukrainian peace deal lifts the market mood
UK & US manufacturing PMI data is due
GBP/USD remains below 1.27

GBP/USD is rising, snapping a 2-day losing streak as the U.S. dollar eases on safe haven outflows amid optimism over a truce between Russia and Ukraine.

Over the weekend, UK Prime Minister Kier Starner said European leaders had agreed to present a peace plan to the US. The meeting between European leaders, Keir Starmer and also Ukraine president Volodymyr Zelensky could be a big move towards ending the three-year war in Ukraine. Optimism of easing geopolitical tensions hit the safe haven appeal of the US dollar.

That said, concerns surrounding trade tariffs, as Trump is poised to apply tariffs on Canada, Mexico, and China from tomorrow, may prevent investors from taking big positions against the USD.

US ISM manufacturing PMI data is due later and is expected to ease to 50.8 in February from 50.9. The data comes after a slate of weaker-than-expected forward-looking US figures, which have raised some concerns over the outlook for the US economy. Weaker-than-expected data could fuel those worries.

The pound benefits from the risk-on mood and cautious comments from Bank of England Deputy Governor Dave Ramsden on Friday. Ramsden said the central bank should take a careful and gradual approach to management policy as inflationary pressures remain elevated due to persistent wage growth. The market has priced in 2 more interest rate cuts this year.

Looking ahead, UK manufacturing PMI data is due shortly and is expected to confirm the preliminary reading of 46.4. An upward revision could help lift the pound. The UK services PMI will be released on Wednesday.

GBP/USD forecast – technical analysis

GBP/USD extended its recovery from the 2025 low of 1.21, rising above the 50 SMA and 1.25. However, the recovery ran into resistance at 1.27.

Buyers, supported by the RSI above 50 will look to rise above 1.27 to expose the 200 SMA at 1.2790. Above here 1.30 comes into play.

Sellers would need to take out support at 1.25 to negate the near-term uptrend. Below here and the 50 SMA at 1.2460 opens the door to 1.2330, the November low.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.