Former Prime Minister Barnier is now a historic figure. In France, after yesterday’s voting, there is neither a budget nor a government. The Monetary Policy Council (RPP) did not change the interest rates, however, a post-meeting announcement was made. The Dax is not stopping and is growing for the sixth trading session in a row.
Swiftly Done
Michel Barnier managed to endure for two and a half months as the Prime Minister of France. To further appreciate this feat, it should be noted that in the history of the Fifth Republic, no head of government has held power for a shorter period. There were many bones of contention in the parliament, but the budgetary act proved to be the final nail in the coffin. It aimed to slightly decrease the gargantuan deficit (from 6.1% to 5%), which did not appeal to either the left or right. The budget itself has been frozen until the appointment of a new government. With this, President Macron will have a serious problem. The mission to find a candidate who will harmonize such a strongly divided environment is likened to the well-known history of Asterix and Obelix. Without a bit of magic, it may be difficult. The market reacted more strongly to the mere announcement of voting than to its result. The outcome is that, in the ping-pong clash, the ball on the eurodollar is above the level of $1.05, a battle that has been ongoing. However, from a market point of view, yields on French debt are rising. The interest rate on 10-year bonds is 2.9%, which means that the spread between the debt of France and Germany is currently 82 points and is the highest since 2012. And let’s not fool ourselves – Germany is not in top shape either.
RPP Mixes with the Announcement
Yesterday’s decision of the Monetary Policy Council was in line with market expectations. Interest rates remained unchanged, which is not the case with the post-meeting announcement. Here we are dealing with a surprising turn of events regarding the multiplication of energy prices. A month ago, NBP’s narrative was that it was difficult to predict the beginning of a cycle of cuts at a time when it was unknown whether the government would want to extend the effect of freezing energy prices. In the meanwhile, the matter has been clarified and price maintenance has been prolonged until September of next year. According to the RPP communication, they considered this… as a risk factor, which could delay the beginning of the cycle. The market, which was not much bothered by yesterday’s meeting, however, changed its mind. Ultimately, the change in perception of freezing energy prices was perceived as a softening of dovish attitude, which may result in a reduction of expectations for March cuts. So far, the consensus assumed the beginning of the cycle from the so-called “jumbo cut”, that is a decrease by 50 basis points. Now more and more analysts are leaning towards 25 b.p.
There’s such an Asset that’s Growing Like Crazy
And it’s not about the media star starting with B. The German stock index is indifferent to the problems of its western neighbor or the weakness of the common currency. DAX is growing for the sixth session in a row, achieving new ATH every day. This good run is trying to catch up with the domestic WSE, although there is of course no talk of historical peaks. Also, the zloty is doing quite well, deepening the decline of the EURPLN rate to PLN 4.27. The dollar is also falling in value, and we will pay below PLN 4.05 for it.
Author: Krzysztof Adamczak, currency analyst Walutomat.pl
Source: https://managerplus.pl/francja-bez-budzetu-i-rzadu-dax-na-szczytach-a-rpp-zaskakuje-komunikatem-54361
