By Vincent-Freìdeìric Mivelaz

France is leading Euro-zone growth, with a final Q4 GDP annualised gain of 2.50% (Q quarter to quarter, +0.70%), a quarterly wage hike of 0.20% (consensus: 0.10%), unemployment at 9% (lowest since September 2009) and a February consumer price index rise of 1.20% (previous: 1.30%). The 2017 public deficit of 2.60% of GDP (2016: 3.40%), is back below the 3% mark imposed by the EU, a level not reached since 2007. France is improving its budget, helped strongly by global growth (e.g. VAT and taxes collected) and structural changes made in national spending.

We remain confident that France’s economy is on the way to recovery, just like the European Union, even though a budget deficit of 2.6% is high compared to Euro (19 EU members) and EU states (27 EU members) averages of 0.60% and 0.90%. Major reforms are still required for government spending of EUR 64.30 billion and a debt estimated at EUR 2’218 billion in 2017 (3.06% increase from 2016).

As EUR/USD continues to gain strength (+3.78% YTD) due to a weaker dollar and growing attraction of the Euro as a reserve currency, we expect the pair currently at 1.2470 to head to 1.25 in the short-term.