The CAC remains under pressure, and has posted slight losses on Tuesday. Currently, the CAC is at 5,331.50, down 0.19% on the day. On the release front, Eurozone Flash GDP remained unchanged at 0.6%, matching the forecast. ZEW Economic Sentiment jumped to 30.9, above the estimate of 29.3 points. Central bankers will attend an ECB event in Frankfurt, and the markets will be listening closely to Mario Draghi and Janet Yellen. On Wednesday, the eurozone releases Trade Balance.
The eurozone economy received a respectable grade on Tuesday, as Flash GDP for the third quarter came in at 0.6%. The eurozone expanded in Q3 at an annualized rate of 2.5 percent. Germany’s robust economy has led the way, with annualized growth of 2.5%, but traditional laggards France and Italy have also rebounded in 2017. At the same time, steady growth has failed to boost inflation, which remains well behind the ECB’s target of around 2.0%. German Final CPI underscored the lack of inflation, with a reading of 0.0% in October. As long as inflation remains at low levels, the ECB is likely to continue its asset purchases program.
Heads of central banks are meeting on Tuesday in Frankfurt, and will be discussing how to communicate with the markets. With central banks signalling major policy shifts, communicating clearly is a critical skill. Janet Yellen and Mario Draghi will both be participating in the discussions. The ECB is set to taper its asset-purchase program in January, while the Fed has started trimming its massive balance sheet. Both Yellen and Draghi are all-too-familiar with unwanted movement in the currency markets when investors were kept in the dark or misinterpreted the Fed or the ECB. Investors will be listening carefully, looking for clues regarding future monetary policy.
