CAC Stems 3-Day Slide, French Services PMI Next

The CAC index has posted gains in the Wednesday session. Currently, the index is at 5309.50, up 0.40%. There are no French or eurozone events on the schedule. Later in the day, the Federal Reserve releases the minutes from the December policy meeting.

Then New Year marked the start of a taper in the ECB asset-purchase program, with monthly purchases dropping from EUR 60 billion to EUR 30 billion. The program has been extended until September 2018, leaving the markets guessing as to what happens then.  As expected, the taper has sent European bond yields sharply higher. Benoit Coeure, who is in charge of ECB bond purchases, stated on the weekend that there was a “reasonable chance” that the ECB would terminate the program in September. If other policymakers reiterate this hawkish stance, we could see some gains in European stock markets.

The Federal Reserve will be in the spotlight on Wednesday, with the release of the minutes of the December policy meeting. At that meeting, the Fed raised rates by 25 basis points, to a range between 1.25-1.50%. The hike marks a vote of confidence in the US economy, and if the minutes are hawkish, the US dollar could gain ground. The economy is expanding at an impressive clip of above 3 percent. If this pace continues, the Fed could raise rates up to four times in 2018. Currently, the CME Group has priced in a January rate hike at 98.5%. Despite the rosy economic conditions, inflation has been chronically soft, well below the Fed target of 2 percent. Outgoing Fed Chair Janet Yellen and other FOMC members have said that they expect that the strong labor market will push up wages and trigger higher inflation, but this is yet to happen.

 

Economic Calendar

Wednesday (January 3)

  • 14:00 US FOMC Meeting Minutes

Thursday (January 4)

  • 3:50 French Final Services PMI. Estimate 59.4
  • 4:00 Eurozone Final Services PMI. Estimate 56.5

*All release times are GMT

*Key events are in bold

CAC, Wednesday, January 3 at 9:10 EDT

Open: 5293.00 High: 5317.50 Low: 5288.50 Close: 5309.50

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.