CAC Moves Higher as Macron Takes Lead in French Election Countdown

The CAC 40 has improved on Thursday and is currently trading at 5043.00. It’s a quiet day on the release front, with no major events on the schedule. Eurozone Consumer Confidence is expected to remain unchanged at -5 points. Friday will be busier, as France and the Eurozone publish PMIs from the services and manufacturing sectors. The markets are expecting these indicators to point to expansion.

It’s the final countdown before the French election, with the first round of voting slated for April 23. This election is one of the tightest in decades, with the four front-runners clustered within a few percentage points. Given the closeness and unpredictability of the election, it’s no surprise that final opinion polls before the vote are moving markets. European stock markets have gained ground on Thursday following a Harris Interactive opinion poll, which shows centrist Emmanuel Macron gaining ground, with 25% of the vote. Far-right candidate Marine Le Pen follows with 22%. Next are Republican candidate Francois Fillon and left-wing candidate Jean-Luc Melenchon, both tied at 19%. Le Pen and Melenchon are running on an anti-EU platform, so the markets are cheering for Macron and Fillion. We can expect more volatility as we near Election Day, and French banks will be manned throughout Sunday night in order to respond quickly to developments in the currency markets as the votes are counted.

Eurozone consumer inflation has been gaining strength in recent months, but softened in March. Final CPI slipped to 1.5%, compared to 2.0% a month earlier. The index climbed to 2.0% in February, which is the ECB’s inflation target. This had led to speculation that the ECB might have to consider tightening its monetary policy, either by lowering interest rates or tapering its asset-purchase program (QE). The ECB’s asset-purchase program is scheduled to remain in place until December, although the central bank will have to reconsider that date or taper the program if growth and inflation numbers in the Eurozone are unexpectedly strong. There are also political considerations at play, as the ECB is reluctant to make any significant monetary moves with the upcoming election in France and a September election in Germany.

What’s next for Janet Yellen & Co.? The Federal Reserve has sent out broad hints that it plans to raise rates gradually in 2017, but the timing and number of moves in store remains uncertain. The Fed has broadly hinted that it plans two more rate hikes this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March are likely to make the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. The odds of a June hike have slipped to 46% according to the CME Group, down sharply from 65% in early April.

Economic Calendar

Thursday (April 20)

  • 10:00 Eurozone Consumer Confidence. Estimate -5

Friday (April 21)

  • 3:00 French Flash Manufacturing PMI. Estimate 53.2
  • 3:00 French Flash Services PMI. Estimate 57.2
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 56.1
  • 4:00 Eurozone Flash Services PMI. Estimate 56.0

*All release times are EST

*Key events are in bold

CAC, Thursday, April 20 at 8:10 EST

Open: 4999.50 High: 4989.00 Low: 5059.50 Close: 5043.00

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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.