The CAC index has posted losses in the Thursday session. Currently, the index is at 5380.80, down 0.35% on the day. In France, Final CPI remained unchanged at 0.1%, matching the forecast. Manufacturing PMI accelerated for a seventh straight month, improving to 59.3 points. This easily beat the forecast of 57.2 points. The news was not as good from the services sector, as Services PMI dipped to 59.4, shy of the estimate of 59.8 points. Still, this is in indicative of strong expansion.
Thursday’s French indicators are reflective of current economic conditions. The manufacturing and services sectors continue to point to expansion, with readings well above the 50-point level. However, inflation remains a sore point in France, reflective of low inflation levels across the eurozone. In the second half of 2017, French CPI has not cracked above 0.1%, with the exception of the August release. Still, the year is ending on an optimistic note in the eurozone’s second largest economy. Growth has been steady, unemployment is lower, and investor and business confidence has been boosted by the election of pro-business Emmanuel Macron as president.
As expected, the Federal Reserve raised the benchmark interest rate on Wednesday, to a range between 1.25% and 1.50%. This marked the third rate hike in 2017, and is reflective of a strong performance of the US economy. The Fed statement was optimistic about the economy, noting that the labor market "remained strong". It also lowered its unemployment forecast in 2018 from 4.1% to 3.9%, and revised growth for 2018 from 2.1% to 2.5%. Despite this rosy prognosis, the US dollar was broadly down after the announcement. Why? One reason is the sore point in the economy – inflation. The Fed has not changed its September forecast for rate hikes next year, with the Fed dot plot indicating that three rate hikes are projected for 2018. This disappointed some investors who would like to see four increases next year. As well, the rate statement said that the Fed did not expect the tax reform legislation to have any long-term effect on the economy, contradicting White House claims that the legislation would trigger substantial economic growth.
