The CAC index has inched higher in the Monday session. Currently, the index is currently trading at 5156.30 and is down 0.20% on the day. On the release front, Eurozone Sentix Investor Confidence edged up to 28.4, above the estimate of 28.1. There are no French events on the schedule.
French president Emmanuel Macron has promised economic change, and the French government has acted quickly, promising to lower its budget deficit to the 3 percent of GDP. The 3 percent rule is required by the EU, but Brussels has chosen to turn a blind eye to the many members who run deficits above 3 percent. This move sends a message to the ECB that France is serious about economic reform. Last week, French Finance Minister Bruno Le Maire said that the government could cut spending and taxes at the same time. The government wants to project a “finance-friendly” image, which is critical in France’s efforts to lure financial sector jobs which are being relocated from London to the continent as a result of Brexit.
With the euro-area continuing to record stronger growth, the ECB is tiptoeing towards a tighter policy, as underscored by the ECB’s June minutes. Policymakers discussed removing its “easing bias” at the June meeting, but ultimately decided not to make a move, since stronger economic conditions had not resulted in higher inflation. At the same time, minutes were cautious in tone, noting that “it was necessary to avoid signals that could trigger a premature tightening of financial conditions”. ECB chief economist Peter Praet reiterated the bank’s stance at a conference in Paris last week. Praet noted that eurozone economic growth is accelerating, but said that the ECB still needs to provide a “steady hand” in order to spur stubbornly low inflation levels. The ECB holds its next policy meeting on July 20. In June, the bank removed an easing bias towards lowering interest rates. However, policymakers may now be wary about sending more signals of tightening policy, so as to avoid another run on the euro, as was the case after Draghi’s comments at the ECB forum. The ECB doesn’t want the rate statement to shake up markets, so we could see an innocuous statement, to the effect that the economy is headed in the right direction, but QE will remain in place until inflation levels move higher.
Monday (July 10)
- 4:30 Eurozone Sentix Investor Confidence. Estimate 28.1. Actual 28.3
*All release times are EDT
*Key events are in bold
CAC, Monday, July 10 at 8:30 EDT
Open: 5159.00 High: 5166.00 Low: 5148.50 Close: 5156.30
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