HomeContributorsFundamental AnalysisCAC Gains Ground on Strong Eurozone Inflation Report

CAC Gains Ground on Strong Eurozone Inflation Report

The CAC index has started the trading week with gains. Currently, the index is at 5,226.00, up 0.26% on the day. On the release front, Eurozone Final CPI improved to 1.5%, matching the forecast. On Tuesday, the eurozone releases its current surplus and ZEW Economic Sentiment, both of which are expected to improve.

France received a thumbs-up from the OECD last week, which released a report on the French economy. The OECD is forecasting French growth of 1.7% in 2017, compared to a 1.1% gain in 2016. The report commended President Emmanuel Macron’s agenda to reform the economy, but emphasized that the government needed to cut public sector spending, which is the highest in the 35-member OECD. The report also called on the French government to overhaul the country’s labor laws, including cutting pension costs and raising the current retirement age of 62 years. With President Emmanuel Macron declaring he will reform France’s labor laws, powerful trade unions are mobilizing to fight back. On Tuesday, some 200,000 trade unionists came out for a mass protest. The government plans to adopt new labor rules on September 22, and two large unions have threatened to respond with a massive truckers strike on September 25, which could cause chaos across the country.

French President Emmanuel Macron, a staunch supporter of a unified Europe, is hoping to continue working with German Prime Minister Angela Merkel after the German election, and focus on reforming the eurozone. Macron’s proposal includes a eurozone finance minister who would be in charge of a eurozone budget. Macron’s call for greater cooperation is linked to Britain’s exit from the EU, which could lead to divisions among the remaining 27 members in the bloc. However, the French ambitious plan will need Germany’s support before it can become a reality. Will Germany embrace the idea? Angela Merkel has indicated that she is open to the idea, but Jean-Claude Juckner, head of the European Commission, came out against the plan last week. Juckner said he favored a finance minister for the EU but was against a separate eurozone budget and finance minister. Even if the plan is not adopted, we can expect a Macron-Merkel alliance to take steps which will strengthen Franco-German ties and further unify the eurozone.

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