CAC Flat Ahead of French Nonfarm Payrolls, German GDP

The CAC is unchanged in the Thursday session, as the index is trading at 5,396.80. On the release front, there are no eurozone or French economic releases on the schedule. The EU released its Spring 2017 Economic Forecast, which presented a generally optimistic picture of the economies of eurozone members. In the US, PPI is expected to show a slight gain of 0.2%. On Friday, Germany releases Preliminary GDP. It will be a busy day in the US, which will publish retail sales and CPI reports.

The eurozone economy received a passing grade on Thursday, as the European Commission released its Spring 2017 Economic Forecast. The report noted that the European economy is in its fifth year of recovery, and forecast eurozone GDP growth of 1.7% in 2017 and 1.8% in 2018. On the inflation front, the report stated that inflation had risen in recent months, but this was mainly due to an increase in oil prices. Still, inflation was expected to reach 1.6% in 2017 and 1.3% in 2018, compared to just 0.2% in 2016. Stronger growth has led to lower unemployment, and the report projected that eurozone unemployment rate would drop to 9.4% in 2017 and 8.9% in 2018. The report reiterated what ECB president Mario Draghi has long been saying, namely, that risks to the eurozone economy remain tilted to the downside. These risks include US economic and trade policy under President Trump, the banking sector in Europe and the UK’s exit from the EU. This forecast is considerably more optimistic than the Winter 2017 forecast, as is apparent from the captions in the press releases for these two reports: The Winter forecast was entitled “Navigating through choppy waters”, while the caption for the Spring forecast reads “Steady growth ahead”.

Anytime Mario Draghi is talking, the markets are all ears. The ECB president spoke about monetary policy before a Dutch parliamentary committee on Wednesday, but there was nothing new in his remarks. Draghi reiterated that the ECB continues to monitor growth and inflation levels, but has no plans at present to modify its monetary policy. Draghi said that that central bank would tighten its policy once the “tail risks” of a drop in inflation receded and growth improved. Currently, the ECB is making monthly purchases of EUR 60 billion under its asset-purchase scheme, which is scheduled to expire in December. Inflation levels were higher in the first quarter, which led to calls for Draghi to tighten policy. However, the ECB was reluctant to make any moves during the French election campaign, and this aversion could continue, with Germany holding elections in September. The central bank appears satisfied with the status quo, and can be expected to hold course, unless eurozone growth and inflation levels climb sharply.

ECB Study Shows Eurozone Unemployment Higher than Official Data

Donald Trump has been embroiled in a number of controversies in his short presidency, but the political earthquake he has now stirred could become political quicksand. Trump abruptly fired FBI director James Comey on Tuesday, stunning lawmakers on both sides of the aisle in Congress. Comey, who has been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign, clearly has been a thorn in Trump’s side. The White House has claimed that it fired Comey over his handling of an email scandal involving Hillary Clinton, but the move has been roundly condemned by the Democrats, and some key Republicans have also voiced opposition as well. The firestorm could heat up further, with calls in Congress to appoint a special prosecutor into Trump’s connections with Russia. Has Trump gone one step to far? This latest controversy could cause some jitters among investors and hurt the US dollar.

Comey Sacking Creates Problems For Russian Probe

Economic Calendar

Thursday (May 11)

• 4:00 ECB Economic Bulletin
• 5:00 EU Economic Forecasts
• 8:30 US PPI. Estimate 0.2%

Friday (May 12)

• 2:00 German Preliminary GDP. Estimate 0.6%
• 2:45 French Preliminary Nonfarm Payrolls. Estimate 0.2%
• 5:00 Eurozone Industrial Production. Estimate 0.3%
• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.6%

*All release times are EDT

*Key events are in bold

CAC, Thursday, May 11 at 7:30 EDT

Open: 5406.80 High: 5408.50 Low: 5390.00 Close: 5396.80

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