The economy of France has survived, but strikes can cause significant damage.
January 31, 2023 3:21 pm
According to published data, France avoided a contraction of the economy at the end of 2022, allaying concerns that the eurozone continues to slide into recession, brought on by a sharp increase in interest rates as a result of the rapid rise in prices. In the meantime, market participants are hoping that the euro will be able to defend itself and stay above 1.0840.
The Insee statistical agency reports that new investments and strong retail sales helped France’s gross domestic product grow by 0.1% in the fourth quarter. The GDP was expected to stay the same, according to economists. After comparable data for Germany showed an unexpected fall, these numbers provide some satisfaction. A report on the GDP for the entire eurozone will be published a bit later, and many believe it decreased at the end of last year.
This is bad news for the euro, which depends on the European Central Bank continuing its aggressive monetary policy at its meeting this Thursday. Anything can be anticipated from the regulator given that the economy has the potential to severely slow down. I anticipate that demand for risky assets will remain strong and that the euro will continue to rise after the central bank meetings if the growth rate exceeds or at least reaches economists’ forecasts.
Even the conflicting picture presented by France and Germany, according to some experts, is unlikely to deter the European Central Bank from increasing interest rates. Despite the slowing of price increases, government officials are concerned about the continuation of core inflation.
Going back to the report, it is important to note that not everything went well. Domestic demand showed signs of deterioration as a result of decreased household spending. Consumer expenditure decreased by 1.3% in December alone compared to November, although economists had anticipated an increase of 0.3%.
France’s GDP is expected to expand by just 0.1% this quarter, according to Insee forecasts. Surveys reveal that while consumer dissatisfaction with the economy is increasing, corporate confidence is still above long-term trends.
Protests and strikes can also have an impact on activity.
On Tuesday, French labor unions will hold a second day of major strikes and rallies against raising the retirement age, putting Emmanuel Macron and his economic reform to the test.
According to the nation’s railway operator, only one-third of high-speed TGVs will be in use soon. The Paris metro is predicted to see significant interruptions and light traffic. Many schools will also close.
It is not surprising that Macron had the largest protests throughout his whole presidency following the planned change to raise the retirement age. Over 1.1 million people have taken to the streets as a result of the diverse trade unions in the nation uniting together. Since then, surveys have shown that the opposition is becoming more powerful.
A retreat would jeopardize a crucial component of Macron’s plan to stabilize France’s budget deficit and the capacity of the economy to expand and generate jobs, so he has already committed to ending his program.
The French government has also stated that reform is required to prevent shortages in the upcoming years, particularly given the strain on the public finances already caused by the massive expenditures made in response to the COVID pandemic and the energy crisis. Given the relatively low employment rate among older employees, the International Monetary Fund stated on Monday that the reform might help improve the supply of labor. This is another important priority of the Macron administration.
In any case, investors’ attitudes will be badly impacted by the deterioration of the strike-related situation in the nation since it is hard to rule out a similar development of the situation in other nations.
Regarding the technical analysis of EUR/USD, there is still demand for the single currency, and there is a potential that monthly and annual highs will continue to be updated. Staying above 1.0840 is important to achieve this, which will cause the trading instrument to rise to 1.0880. Above this level, you can easily reach 1.0910 and update 1.0970 in the near future. Only the collapse of support at 1.0840 will put more pressure on the pair and drive EUR/USD to 1.0805, with the possibility of dropping to a minimum of 1.0770 if the trading instrument declines.
Regarding the GBP/USD technical picture, the pressure on the pound is progressively increasing. Buyers need to return above 1.2330 to restore their advantage. However, only if the resistance at 1.2380 is broken will there be a greater chance of a rebound to the area of 1.2440, following which it will be possible to discuss a more rapid movement of the pound up to the area of 1.2490 and 1.2550. After the bears seize control of 1.2330, it is feasible to discuss the pressure on the trading instrument. The GBP/USD will be forced back to 1.2270 and 1.2170 as a result, hitting the bulls’ positions.
The material has been provided by InstaForex Company – www.instaforex.com
According to published data, France avoided a contraction of the economy at the end of 2022, allaying concerns that the eurozone continues to slide into recession, brought on by a sharp increase in interest rates as a result of the rapid rise in prices. In the meantime, market participants are hoping that the euro will be able to defend itself and stay above 1.0840.
The Insee statistical agency reports that new investments and strong retail sales helped France’s gross domestic product grow by 0.1% in the fourth quarter. The GDP was expected to stay the same, according to economists. After comparable data for Germany showed an unexpected fall, these numbers provide some satisfaction. A report on the GDP for the entire eurozone will be published a bit later, and many believe it decreased at the end of last year.
This is bad news for the euro, which depends on the European Central Bank continuing its aggressive monetary policy at its meeting this Thursday. Anything can be anticipated from the regulator given that the economy has the potential to severely slow down. I anticipate that demand for risky assets will remain strong and that the euro will continue to rise after the central bank meetings if the growth rate exceeds or at least reaches economists’ forecasts.
Even the conflicting picture presented by France and Germany, according to some experts, is unlikely to deter the European Central Bank from increasing interest rates. Despite the slowing of price increases, government officials are concerned about the continuation of core inflation.
Going back to the report, it is important to note that not everything went well. Domestic demand showed signs of deterioration as a result of decreased household spending. Consumer expenditure decreased by 1.3% in December alone compared to November, although economists had anticipated an increase of 0.3%.
France’s GDP is expected to expand by just 0.1% this quarter, according to Insee forecasts. Surveys reveal that while consumer dissatisfaction with the economy is increasing, corporate confidence is still above long-term trends.
Protests and strikes can also have an impact on activity.
On Tuesday, French labor unions will hold a second day of major strikes and rallies against raising the retirement age, putting Emmanuel Macron and his economic reform to the test.
According to the nation’s railway operator, only one-third of high-speed TGVs will be in use soon. The Paris metro is predicted to see significant interruptions and light traffic. Many schools will also close.
It is not surprising that Macron had the largest protests throughout his whole presidency following the planned change to raise the retirement age. Over 1.1 million people have taken to the streets as a result of the diverse trade unions in the nation uniting together. Since then, surveys have shown that the opposition is becoming more powerful.
A retreat would jeopardize a crucial component of Macron’s plan to stabilize France’s budget deficit and the capacity of the economy to expand and generate jobs, so he has already committed to ending his program.
The French government has also stated that reform is required to prevent shortages in the upcoming years, particularly given the strain on the public finances already caused by the massive expenditures made in response to the COVID pandemic and the energy crisis. Given the relatively low employment rate among older employees, the International Monetary Fund stated on Monday that the reform might help improve the supply of labor. This is another important priority of the Macron administration.
In any case, investors’ attitudes will be badly impacted by the deterioration of the strike-related situation in the nation since it is hard to rule out a similar development of the situation in other nations.
Regarding the technical analysis of EUR/USD, there is still demand for the single currency, and there is a potential that monthly and annual highs will continue to be updated. Staying above 1.0840 is important to achieve this, which will cause the trading instrument to rise to 1.0880. Above this level, you can easily reach 1.0910 and update 1.0970 in the near future. Only the collapse of support at 1.0840 will put more pressure on the pair and drive EUR/USD to 1.0805, with the possibility of dropping to a minimum of 1.0770 if the trading instrument declines.
Regarding the GBP/USD technical picture, the pressure on the pound is progressively increasing. Buyers need to return above 1.2330 to restore their advantage. However, only if the resistance at 1.2380 is broken will there be a greater chance of a rebound to the area of 1.2440, following which it will be possible to discuss a more rapid movement of the pound up to the area of 1.2490 and 1.2550. After the bears seize control of 1.2330, it is feasible to discuss the pressure on the trading instrument. The GBP/USD will be forced back to 1.2270 and 1.2170 as a result, hitting the bulls’ positions.
The material has been provided by InstaForex Company – www.instaforex.com
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