Macron-economics Impact on the Euro

11 May, 2017

Macron-economics Impact on the Euro

Macron’s promise for reform might be much more than words – the former investment banker and Minister of Economics has been a proponent of rapid reform since his days with the Hollande administration – which he walked away from twice in protest of the snails’ pace the administration moved toward economic restructuring. His primary emphasis according to the president elect will revolve around staving off rising unemployment and making France both economically relevant and competitive again, something that it hasn’t been for decades. Markets are still skeptical though since Macron will need the National Assembly’s backing to apply any sort of reform or restructuring. Another obstacle stands between the politician and a new French economy; His party En Marche! is unproven – and with the upcoming legislative elections - sentiment regarding Macron’s ability to deliver is being further questioned. No matter what the situation at hand; the current state of the economy or market sentiment – Macron has already announced a rough outline of his economic program. Below are some of the main points:

Macron’s Economic Program

Although Macron wants to allow the work week allowing flexibility for unions and enterprise to arrange special agreements with employees. To combat the barely double digit, yet relatively high (10%) unemployment rate Marcon proposes programs that will help both low-skilled employees and unemployed youth learn applicable and ultimately employable skills. Macron has been pro-economic growth and a proponent strengthening the Euro from the beginning and this is reflected in his recommendation for a corporate tax cut in the neighborhood of 25% (a decrease of 8.3%). Also Macron seeks to lower labor charges for low income workers.

Continuing the President’s commitment to economic reform, Marcon has promised to trim the proverbial fat of the over-staffed public sector. The figures proposed are a whopping 120,000 jobs cut that will ultimately save the state a speculated 60 billion euros. This will inevitably assist Macron’s intention to invest 50 billion Euros in the public sector including investments in green energy, transportation, the aforementioned training program and agriculture. The investment will be funded via loans which take advantage of the EU’s current historic low interest rates. Sceptics of this plan have been deflected by Marcon saying a potential debt crisis will be averted due to the slow rate of growth in combination with the low interest rate.
Reduce French public debt with a target of 93.2% of the annual economic output or down 2.8% from the 2016 levels. Macron also seeks to lower the public deficit from the 2016 level of 3.4 or the projected 2.8 percent speculated for 2017 to 1.0 percent.

Markets’ Reaction to Macron’s Win

Markets are of course relieved by the election of Marcon opposed to the pro-Frexit hard-right candidate Le Pen that had the potential to destabilize not only the Euro but the EU itself, this doesn’t mean though that they have necessarily lowered their guard. This is probably largely due to the election of President Trump in the United States that promised ambitious and aggressive economic reforms during his campaign but failed to deliver on multiple of these once in office. To compound this apprehensiveness is the upcoming legislative elections that could completely hobble Macron’s ability to implement his economic plan without  the French National Assembly’s support. No matter what happens to the Euro, you will be able to stay up to date with one STO's competitive accounts – trade on our VIP account to gain access to institutional spreads as low as 0.0 pips. Follow us on social media for up to date information regarding important economic policy events, geopolitical events and other factors which affect the markets.


Source link  
Yellen's Testimony, BoC Interest Rate Hike, Big Bank Reports

Hawkish or Dovish, well today we have retrospective examples of its effect on the sentiment for a currency. In one case Yellen’s indication that national debt should be capped and that monetary policy should be gradual...

Gold Dropped as Forecasted

This is a notable day for several interrelated moves: the fall of the yen, the rise of the dollar, and the drop in precious metals. All these changes resulted ...

Deutsche Bank Derivative Loss

Although markets seemed to calm after last week’s activity, this doesn’t mean that the newsrooms are quiet. One of the big topics – is Deutsche Bank’s big derivative loss estimated at $60 million due to a risky bet placed on U.S. Inflation. According to Bloomberg.com...


Italy Commits 17 Billion Euros to Keep Veneto Banks Afloat

Italy arranged for one of the biggest bank rescues in history, with a cost of up to 17 billion euros ($19 billion) in order to wind up two failed banks in one of Italy's wealthiest regions. However, the deal- which was approved by the European Commission...

Oil in Bear Market

Yesterday we saw a continuation in the drop of oil prices, which rippled out into the markets – pulling down both US and European Stock with it. This is likely a result of fears due to the non-OPEC countries ramping up production to cover the gap left from the OPEC+ agreement to restrict production...

Brexit Update - The EU Wins Round 1

Although not an outright conflict, the discussions surrounding the Brexit talks have been at best contentious and at worse...


Economic Calendar: BoJ, ECB, US Housing

The previous week's economic calendar had the potential to destabilize some of the world's most traded currencies...

Is the USD Going Up After its Recent Drip?

The US dollar is showing signs of recovery against other major currencies, sans the GBP. After the Bank of England Meeting Minutes announced an increase of interest rates, GBP/USD prices saw a significant upswing. This resulted in GBP climbing from 1.2696 to roughly 1.2755...

US dollar saw a rapid drop

The US dollar saw a rapid drop of its price opposite other major currencies after the announcement of the less than positive and expected statistics regarding U.S. inflation and retail sales. Retail sales dipped significantly to 0.3% in May down from the 0.4% rate of the previous month...

  


Share: