The France CAC 30 continues to have a quiet week. This lack of movement has continued on Thursday, with French banks closed for Ascension Day. Early in the North American session, the CAC is trading at 5342.65 points. On the release front, there are no economic releases out of France or the eurozone. OPEC members are holding a meeting in Vienna, and the markets will be keeping a close eye on oil prices. On Friday, heads of states from the G-7 nations meet in Sicily. As well, the US will release revised GDP for the first quarter, which is expected at 0.9%, compared to the initial GDP release, which came in at 0.7%.
Fresh after his decisive election win, French President Emmanuel Macron has set his sights on a strong showing in parliamentary elections in June. Macron appears to be well on his way, as a recent poll for Sud Radio found that Macron’s center party would win a third of the seats in the first round of the vote, ahead of all other parties. Macron is keen to deepen relations with Germany, which is France’s largest trading partner, with 16% of French exports going to Germany. The closeness of Franco-German relations was highlighted by Macron’s visit to Berlin just days after winning the presidency. Macron should be able to work well with German chancellor Angela Merkel, both of whom are firm supporters in European integration. The EU is facing difficult challenges, notably Britain’s departure from the club and Donald Trump’s protectionist agenda.
There were no dramatic statements in the Federal Reserve minutes. Policymakers were careful in their message, saying that a rate hike was coming "soon". To disappointed markets, this sounded like a "definite maybe". Does that mean a move at the June policy meeting? The markets believe so, as Fed funds futures for a June hike remained at 78% after the minutes were released. At the same time, the Fed has given itself some wiggle room, and could opt to delay a hike until the second quarter if inflation or consumer indicators take an unexpected nosedive. The minutes stated that policymakers wanted to see additional evidence that the recent slowdown in the economy was temporary before raising rates. As for additional hikes in 2017, the markets remain skeptical. The odds for a September rate stand at just 37%. This pessimism is a result of a weak performance from the US economy in Q1, as well as doubts that President Trump, who is facing congressional investigations over his connections with the Russian government, will be able to pass his agenda of cutting taxes and government spending. Gone are the heady days at the end of 2016, when a red-hot US economy had analysts predicting four rate hikes in 2017. At the same time, a strong improvement in economic data could quickly change the cautious tone of the Fed and revive discussion of four rate hikes this year.
