CAC Dips on Trump Dollar Statement, Geopolitical Jitters

The CAC 40 has dropped below the 5100 level, as the index is trading at 5,073.00 in Thursday trade. On the release front, France and Germany both released consumer inflation data. German Final CPI dropped to 0.2%, matching the forecast. French Final CPI took the opposite direction, improving to 0.6%, matching the forecast. On Wednesday, President Donald Trump said in a newspaper interview that the value of the US dollar was too strong and that he was in favor of a low interest rate policy. Trump’s comment has sent the greenback lower and is weighing on European stock markets.

European stock markets, including the CAC, are under pressure, as investors remain jittery about rising tensions in Syria and North Korea. The US bombed a Syrian military base last week, in response to a chemical attack by Syrian warplanes. Russia has strongly condemned the US move, chilling relations even further between the US and Russia. President Trump has declared that he has sent “an armada” to the Korean peninsula in response to North Korea firing ballistic missiles, and the escalation in rhetoric between North Korea and the US is weighing on the stock markets.

The hotly contested French presidential election, with the first round on April 23, is sure to have a strong impact on the stock market as we get closer to voting day. The current frontrunners are centrist Emmanuel Macron and far-right leader Marine Le Pen, but the race remains tight and unpredictable. Le Pen has been an outspoken critic of the eurozone and wants to hold a referendum on France’s membership in the EU. She is expected to advance to the second round, and Le Pen’s success could dampen confidence in the euro and the stock market.

Earlier this week, Federal Reserve Chair Janet Yellen provided some insights into the central bank’s plans in 2017. Yellen said that with the economy close to full employment and 2 percent inflation, the Fed was in a better position to reduce its support for the US economy. The minutes of the March meeting indicated that the Fed plans to trim the $4.5 trillion balance sheet, which has ballooned as a result of the huge asset-purchase program which started in response to the financial crisis in 2008. Yellen emphasized that the Fed’s policy stance is neutral, as interest rate increases will be gradual, given that the economy is growing at a moderate pace. The Fed is widely expected to raise rates twice more in 2017, with the next rate expected in June. At the same time, some Fed policymakers have come out in favor of three more rate hikes, which would bring the total this year to four moves.

Economic Calendar

Thursday (April 13)

  • 2:00 German Final CPI. Estimate 0.2%
  • 2:45 French Final CPI. Estimate 0.6%

*All release times are EST

*Key events are in bold

CAC, Thursday, April 13 at 7:00 EST

Open: 5090.80 High: 5091.80 Low: 5065.50 Close: 5073.00

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
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.