Apr. 21, 2017 (Commerzbank AG) – France – Macron is no saviour
On Sunday, the French will decide which two candidates to send into the presidential election run-off on 7 May. If Emmanuel Macron turns out to be the new French president, we are likely to hear a big sigh of relief from the markets and many European capitals. But Mr. Macron is not a deep-rooted reformer. He will not tackle the decisive obstacles to higher employment. And at a European level, the debate over the appropriate response to the euro zone crisis will continue even if he wins.
ECB Council meeting: Steady hand until June, at least
As doubts should continue within the ECB Council that inflation will rise towards 2% in a sustained manner, the central bank ought to stick to its steady-hand policy for now and point to its projections in June. Moreover, the ECB looks set to adhere to its forward guidance.
Outlook for the week of 24 to 28 April 2017
- Economic data: The fact that the Easter holidays fell in April this year rather than in March, will result in a roller-coaster ride for the euro zone core inflation rate. After declining to 0.7% in March, it will likely rise to 1.0% in April, only to fall back to 0.9% in May. In the US, the economy probably got off to another poor start to the year.
- Bond market: Going forward to next week, rates trends in the wake of French presidential elections may prove bumpy after the first round, especially if Le Pen were to do better than suggested by current polls.
- FX market: The elections in France are likely to dominate movements in EUR exchange rates. Against this backdrop, the ECB meeting is likely to take a back seat. At the same time, the recent weakness of the economy and inflation in the US are weighing on the US-dollar.
- Equity market: The uncertain outlook for auto stocks remains a key headwind for the DAX. If auto stocks traded at their P/Es of April 2015 the DAX would already be at 12,900.
- Commodity market: First OPEC production estimates for April should indicate that discipline in adhering to the agreed production cuts is still high which ought to support the oil price.