The CAC index has posted gains in the Thursday session. Currently, the CAC is trading at 5,404.75, up 0.58% on the day. On the release front, the ECB will release its rate statement, followed by a press conference with ECB President Mario Draghi. On Friday, the US releases Advance GDP.
The CAC remains at high levels, and on Wednesday, the index hit its highest level since mid-May. Will the upward movement continue after the ECB policy meeting? No change is expected in interest rates, which are currently at 0.00%. However, Mario & Co. could significantly trim the ECB’s asset purchase program (QE). Currently, the ECB is purchasing EUR 60 billion/mth, and there is a strong likelihood that this amount will drop to EUR 30 billion/mth. The stronger eurozone economy is the catalyst behind a taper, but with inflation persistently at low levels, the ECB is expected to announce to extend the program well into 2018 or even later. Eurozone members remain divided as to whether the ECB should signal a clear commitment that it plans to wind up QE. Germany and the Netherlands are in favor of a quick exit, but other members want the scheme to remain open-ended, so that the ECB can continue with extensions, if needed. ECB policymakers will need to perform a balancing act between these views as it shifts its monetary policy.
The French economy has rebounded this year, and service and manufacturing reports on Wednesday suggest that fourth quarter growth will be strong. Manufacturing and Services PMIs came in at 56.7 and 57.4 points respectively, both which beat expectations. The French government is determined to overhaul the economy and has targeted public spending, with plans to cut 120,000 civil servants. The government also expects that the deficit will drop below 3 percent of GDP in 2017, in keeping with EU guidelines. Last year, the deficit stood at 3.4 percent of GDP.
