CAC Rebounds as North Korea Jitters Ease

The CAC index has recorded gains in the Wednesday session. Currently, the index is at 5,060.30, up 0.56% on the day. On the release front, there are no French or euro zone events. In the US, Preliminary GDP is expected to gain 2.7%. On Thursday, the euro zone releases CPI Flash Estimate for August, which is expected to show a gain of 1.4%.

European stock markets are showing volatility this week, as tensions in the Korean peninsula are again in the headlines. The CAC lost ground on Tuesday, after North Korea fired a ballistic missile which flew over northern Japan before crashing into the ocean. Japan and the US sharply condemned the missile launch, with President Trump saying that “all options remain on the table”. With tensions once again climbing in the Korean peninsula, investors are bracing for more stock market losses, and both gold and the Japanese yen, which tend to rise in periods of crisis, have gained ground this week.

The euro continues to gain ground against the US dollar. The currency has soared 12.0% since April 1, and on Tuesday, the euro pushed above the 1.20 level for the first time since January 2017. The euro has benefited from stronger growth in the eurozone in 2017, led by robust growth in Germany. However, the euro’s streak has weighed on the shares of automobile makers and other exporters, as a stronger euro has made exports more expensive. Investors are anticipating that the ECB will provide some guidance on plans regarding its asset purchase program (QE), which is scheduled to terminate in December. The ECB is widely expected to taper its QE program early next year, but so far has been mum about its plans. Analysts expect the ECB to address its stimulus package at the next policy meeting on September 7.

Last week’s meeting of central bankers in Jackson Hole was a low-key affair. On Friday, ECB President Mario Draghi took a page out of Janet Yellen’s page book, opting to steer away from any discussion about ECB monetary policy. Instead, Draghi spoke about the importance of free trade and financial reforms. Draghi seems to have learned a lesson from a meeting of central bankers in Portugal in June, when the markets seized on his comments that the euro zone was undergoing a broad recovery, and the euro soared. However, Draghi won’t receive another free pass next month, when the ECB holds its next policy meeting, and is expected to address its ultra-accommodative monetary policy.

 

Economic Calendar

Wednesday (August 30)

  • 8:30 US Preliminary GDP. Estimate 2.7%

Upcoming Events

Thursday (August 31)

  • 5:00 Euro zone CPI Flash Estimate. Estimate 1.4%

*All release times are EDT

*Key events are in bold

 

CAC, Wednesday, August 30 at 8:00 EDT

Open: 5060.50 High: 5068.30 Low: 5045.50 Close: 5060.30

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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.