The CAC index has lost ground in the Tuesday session. Currently, the index is at 5493.80 down 0.50% on the day. On the release front, French Flash GDP edged up to 0.6%, beating the estimate of 0.5%. Eurozone Preliminary Flash GDP for the fourth quarter remained unchanged at 0.6%, matching the forecast. Later in the day, the eurozone releases Preliminary CPI for Q4, with the markets braced for a decline of 0.5%. As well, President Trump will deliver his State of the Union address before Congress. On Wednesday, the eurozone releases CPI Flash Estimate. In the US, the Federal Reserve will release a monetary policy statement, with the markets expecting the benchmark rate to remain unchanged at a range between 1.25%-1.50%.
Eurozone numbers for fourth quarter 2016 remain solid, led by strong German data. Eurozone Preliminary Flash GDP posted a respectable gain of 0.6%, unchanged from the Q3 release. French Flash GDP also gained 0.6% in Q4. An improved trade balance boosted the GDP release, aided by stronger exports and lower imports. On an annual basis, French GDP expanded 1.9%, substantially better than the 1.6% reading in 2016.
The euro posted strong gains last week, after US Treasury Secretary Robert Mnuchin said that the US had no problem with a weak dollar. ECB policymakers were not pleased with Mnuchin’s statement, and Mario Draghi, without naming Mnuchin, said that such comments amounted to "targeting the exchange rate". Mnuchin has since backtracked, saying that his words were taken out of context and that the US has a long-term interest in a strong dollar. President Trump added that Mnuchin was misinterpreted, but these attempts at damage control haven’t had much effect, as EUR/USD has traded sideways since the Mnuchin comments.
