CAC slips as Trump tariffs spook investors

The CAC index has started the week with sharp losses. In the Monday session, the CAC is at 5436, down 1.2% on the day. On the release front, there are no eurozone or French indicators. The highlight of the day is the opening of the ECB Forum, which kicks off with a speech from ECB President Mario Draghi. On Tuesday, Draghi will participate in a panel discussion. As well, the eurozone releases current account, with the surplus expected to drop to EUR 30.3 billion.

The markets are watching nervously, as trade relations between the United States and China continue to deteriorate. Investor risk appetite has softened after U.S President Trump imposed further tariffs on some $50 billion of Chinese products. China has promised to retaliate against U.S imports, as trade ties between the world’s two largest economies continue to deteriorate. With the U.S recently slapping tariffs on the E.U and the NAFTA talks in pause mode, it is no wonder that investor anxiety has risen. If the trade war between the U.S and its partners continues to escalate, traders can expect global equities to continue to lose ground.

The CAC jumped on Thursday, posting gains of 2.0%. The markets jumped after the ECB policy meeting, when the ECB said that it had no intention of raising interest rates prior to the second half of 2019. The ECB pledged to taper its bond-purchase program to EUR 15 billion/mth, in October, down from the current pace of EUR 30 billion/mth. The program will wind up at the end of the year. However, investors detected a ‘dovish flavor’ to the announcement, as the ECB added that interest rates would remain steady “at least through the summer of 2019”, giving policymakers plenty of wiggle-room to delay any rate hikes. The markets were anticipating a rate hike shortly after the end of the bond-purchase program, so this announcement surprised the markets and sent the euro sharply lower. ECB head Mario Draghi sounded dovish in his press conference, saying that the eurozone economy was facing “increasing uncertainty”. Draghi was likely referring to the G-7 meeting which ended in disarray as well as the election of a euro-sceptic government in Italy. The ECB also lowered its growth forecast for the eurozone to 2.1%, down from 2.4% earlier this year.

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Economic Calendar

Monday (June 18)

  • 13:30 ECB President Mario Draghi Speaks

Tuesday (June 19)

  • 4:00 ECB President Mario Draghi Speaks
  • 4:00 Eurozone Current Account. Estimate 30.3B

*All release times are DST

*Key events are in bold


CAC, Monday, June 18 at 10:40 EDT

 Open: 5487 High: 5491 Low: 5418 Close: 5436

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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