CAC Shrugs off Soft French Consumer Data

The CAC index has ticked lower in the Wednesday session. Currently, the index is at 5,338.50, down 0.08% on the day. On the release front, French Consumer Spending dropped 1.9%, well off the forecast of a 0.5% gain. This marked the third decline in four months. On the inflation front, CPI declined 0.1% for a second straight month, missing the estimate of 0.3%. In the Eurozone, CPI Flash Estimate and Core CPI Flash Estimate posted gains of 1.2% and 1.0%, respectively. Both indicators matched their estimates. On Thursday, Fed chair Jerome Powell testifies before the Senate Banking Committee.

Testifying for the first time before Congress, Federal Reserve Chair Jerome Powell stated that the Fed would continue to raise rates gradually. Powell sounded optimistic about economic conditions, noting that the US economy was benefiting from the global recovery as well as changes in fiscal policy. Importantly, Powell did not address the question of an acceleration of rate hikes. Currently, the Fed has projected three rate hikes in 2018, with increases widely expected at the March and May meetings. However, with inflation moving higher and the economy continuing to perform well, many analysts expect the Fed to raise rates four or more times this year. Any hints at an increased pace of rate hikes could send the US dollar higher and  send European stock markets downwards.

Fed’s Door Ajar for Four Fed hikes

Eurozone CPI indicators for February indicated that inflation remains well below the ECB target of 2 percent, so policymakers needn’t worry about raising rates for some time. The ECB recently lowered its monthly bond purchases, with the program expected to wind up in September. If the economy remains strong, the ECB could opt to raise rates in the fourth quarter or in early 2019.

Economic Calendar

Wednesday (February 28)

• 2:45 French Consumer Spending. Estimate +0.5%. Actual -1.9%
• 2:45 French Preliminary CPI. Estimate +0.3%. Actual -0.1%
• 2:45 French Preliminary GDP. Estimate 0.6%. Actual 0.6%
• 5:00 Eurozone CPI Flash Estimate. Estimate 1.2%. Actual 1.2%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 1.0%
• 8:30 US Preliminary GDP. Estimate 2.5%

Thursday (March 1)

• 3:50 French Final Manufacturing PMI. Estimate 56.1
• 4:00 Eurozone Final Manufacturing PMI. Estimate 58.5
• 10:00 US Fed Chair Powell Testifies

*All release times are GMT

*Key events are in bold

CAC, Wednesday, February 28 at 9:05 EDT

Open: 5,322.00 High: 5,340.30 Low: 5,315.50 Close: 5,338.50

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