Lagarde to focus on French political situation at this week's ECB meeting
The September ECB meeting may be this week, but it is being almost completely overshadowed by the drama around the French budget.
As in the UK, the inability of the government to carry out even modest spending cuts is causing turbulence in the bond market. However, the denouement may be more dramatic in the French case, as the government has threatened to resign in the event that cuts are rejected by Parliament, as seems likely.
We won’t have to wait long to find out, with the confidence vote set to be held later this evening.
With inflation back on target and little economic news this week, we expect that the French situation will be the focus of Lagarde's post meeting conference.
We are unlikely to see any notable shift in her guidance, particularly given the uncertainty surrounding the US-EU trade deal and Germany’s stimulus package, which are not set to be reflected in economic data immediately.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
