**DAX 40, AUD/USD, and Copper Retreat After Recent Gains Amid Uncertainty Over Fed Rate Cut Timing**
*Based on an article by Chris Beauchamp, IG.com, with supplemental insights from other financial news sources.*
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### Markets Experience a Pullback Following Fed Developments
The landscape for global markets, particularly the DAX 40 index, the AUD/USD currency pair, and copper prices, shifted notably this week. These assets, which had recently benefited from prevailing optimism about U.S. Federal Reserve rate cuts, are now giving back gains as investors reevaluate the likely trajectory for U.S. monetary policy in 2024.
**Key Factors at Play:**
– Fresh signals from the U.S. Federal Reserve indicate a more cautious approach to rate cuts
– Stronger-than-expected U.S. economic data reduces immediate pressure on the Fed to act
– Profit-taking and shifting risk appetite have influenced recent selloffs in these markets
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### Fed Rate Cut Expectations in Focus
Market participants spent much of the spring pricing in the possibility of as many as two or three rate cuts from the Federal Reserve before the end of 2024. This consensus was based on indications that inflation was cooling, coupled with some signs of softening in the U.S. labor market.
**However, recent developments have altered this outlook:**
– The U.S. Consumer Price Index for May was slightly higher than expected, suggesting that inflation pressures have not abated as quickly as hoped
– Several Federal Open Market Committee (FOMC) members have reiterated the need for sustained evidence of falling inflation before policy is loosened
– The Fed’s most recent meeting saw policymakers hold rates steady, with the “dot plot” of rate expectations signaling only one cut in 2024, down from projections of three earlier in the year
These developments have weighed on risk assets globally, as the possibility of policy loosening gets pushed further into the future.
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### DAX 40 Index: Correction After Record Highs
The German DAX 40 index, mirroring sentiment in the broader European equity market, has come under pressure after reaching a series of record highs in previous weeks. The pullback represents both a reaction to the shifting outlook for U.S. interest rates and profit-taking after a robust rally.
**Short-term drivers of the DAX’s retracement include:**
– Rising yields in the U.S., which generally reduce the appeal of equities relative to bonds
– Investors reassessing growth prospects in the Eurozone amid mixed economic data
– Sector rotation away from cyclical stocks and into defensive areas, such as healthcare and utilities
**Technical Picture:**
– The index recently failed to hold above the 18,600 level, with sharp reversals seen intraday
– Support is eyed near 18,250 and then at the 50-day moving average, which could act as floors during further declines
– Resistance remains at recent record highs
**DAX 40
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