CAC Subdued as ECB Leaves Interest Rate at 0.00%

The CAC is unchanged in the Thursday session. Currently, the index is trading at 5,267.50. After a quiet week so far, the markets finally have some key releases to digest. The ECB kept the benchmark rate at a flat 0.00%. Later in the day, Germany releases Preliminary CPI, with an estimate of -0.1%. On Friday, the Eurozone releases CPI Flash Estimate. Over in the US, we’ll get a look at Advance GDP.

There were no surprises from the ECB on Thursday, as the central bank made no changes to the benchmark interest rate. The rate has been pegged at 0.00% since March 2016, as the ECB implemented an ultra-loose monetary policy in order to kick-start the weak eurozone economy. The economy has improved in recent months, with inflation and growth numbers moving higher. The brighter economic picture had led to some pressure on the ECB to taper or shorten its asset-purchase program, which is scheduled to wind up in December. However, the ECB appears content to hold course, barring any significant change in growth or inflation numbers. There is also the political card to keep in mind, as the ECB does not want to be seen as intervening in the current French election, or when Germany holds elections in September.

ECB Leaves Rates, Guidance Unchanged

Another Sunday, another Election Day in France. Voters will have their say in the second round of the presidential election on May 7, with centrist Emmanuel Macron and National Front leader Marie Le Pen vying for the office of president. The stock markets have steady over the past few days, having priced in a victory by Macron. Although Macron currently has a comfortable margin of 60-40 in opinion polls, the second round of the campaign has not gone well for the front-runner. Macron was jeered by workers at a factory in his hometown of Amiens, only to have Le Pen show up unexpectedly, to the delight of the workers. A BFM TV poll showed that more voters feel that Le Pen has run a better campaign in round than Macron. This may not change the expected outcome of a Macron win, but a strong showing by Le Pen on Sunday would show that her strident anti-EU stance has wide popularity, and this could sour investor sentiment and send the stock markets to lower ground.

One of President Trump’s most important campaign platforms was overhauling the US tax code. Trump finally announced his long-awaited tax plan on Wednesday. The proposal calls for sharp reductions for both individuals and corporations. The plan calls for three tax brackets for individuals – 10%, 25% and 35%. The corporate sector would also see significant tax relief, with the corporate tax rate dropping from 35% to 15%, and the tax on multinationals’ overseas profits lowered from 35% to 10%. However, any tax reform proposals from the White House will require a stamp of approval from Congress, so Trump’s proposal should be viewed as a blueprint that is a long way off from becoming law. Trump’s proposal was short on details, although government officials are praising it as one of the largest tax cuts and broadest overhauls of the tax system in history. There hasn’t been much reaction from the CAC or other European stock markets, which have been subdued in Thursday trading.

Economic Calendar

Thursday (April 27)

  • All Day – German Preliminary CPI. Estimate -0.1%
  • 7:45 ECB Minimum Bid Rate. Estimate 0.0%. Actual 0.0%
  • 8:30 ECB Press Conference

Friday (April 28)

  • 5:00 Eurozone CPI Flash Estimate. Estimate 1.8%
  • 8:30 US Advance GDP. Estimate 1.3%

*All release times are EST

*Key events are in bold

CAC, Thursday, April 27 at 9:10 EST

Open: 5277.30 High: 5279.05 Low: 5260.80 Close: 5267.50

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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.