Macro Insights

Paris, 24/04/17


First round French elections match expectations; ECB to maintain status quo


  • Emmanuel Macron and Marine Le Pen go to second round. Centrist Macron will face far-right Le Pen in the French presidential election run-off after claiming 23.75% of votes in the first round held on Sunday (versus 21.53% for Le Pen). This result is in line with French pollsters’ expectations and our 6-49 model. Macron is now a clear favourite to win the election as most voters are likely to vote in order to keep Front National away from power; nevertheless we are wary of uncertainties from voter transferences and turnout.
  • ECB likely to stay on hold. The Governing Council of the ECB is likely to leave monetary policy as well as forward guidance unchanged in the face of yet subdued inflation (+0.7% y-o-y for core inflation in March). We still expect core inflation to gradually pick up and the ECB to announce in either September or October that we could see a further slowdown in the Asset Purchase Program in 2018.
  • In the US, Q1 GDP will be the main focus. We expect a soft +1.5% annualised expansion in Q1 GDP, but with uncertainties surrounding the scale of an energy consumption rebound in March and a broader issue of seasonal adjustment, the risks are tilted to the downside in line with the +1.1% consensus outlook. Importantly, we concur with the Federal Reserve’s March assessment that this is a transitory softening. We have left our +2.2% growth assessment for 2017 unchanged for now.
  • Amidst ongoing election preparations in the UK, evidence is mounting of growing support for Conservatives. Three opinion polls over the weekend showed the Conservatives with a lead in excess of 20 points, each suggesting the likelihood of a significantly increased majority on 8 June. On Friday, we will also watch the preliminary Q1 GDP release. We continue to forecast a 0.4% rise in Q1, down from +0.7% in Q4. This is also the consensus outlook. We envisage this slowdown continuing across 2017 and forecast growth of just 1.7% or 2017 as a whole.  
  • Turkish central bank expected to remain on hold on Wednesday. Liquidity has already significantly tightened with the Bank’s effective funding rate having tightened from 8.3% to 11.50% in Q1 2017, while the TRY has recovered substantially since the constitutional referendum. Meanwhile the central bank of Colombia is expected to cut its key interest rates by 25bps on Friday amid disappointing February activity data supported by benign inflation expectations and headline disinflation.


Events coming up:

Euro area: ECB meeting: no change expected (Thursday). Germany's Ifo (Monday). April CPI data for Germany (Thursday), France, Italy and EMU (Friday). Q1 GDP for France and Spain (Friday)

EM: Turkey central bank meeting: no change expected (Wednesday); Colombia central bank meeting: 25bps rate cut expected (Friday)

UK: Q1 GDP (Friday)

US: Q1 GDP (Friday)


Market and asset types measured by the following indices: Equities = MSCI. Fixed Income = JP Morgan and BofAML. 


The Research & Investment Strategy (R&IS) team at AXA Investment Managers present their views on recent developments and the factors shaping markets over the week ahead. For more information on the R&IS team or any of the above comments, please contact us or follow us on social media for updates throughout the week



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