FRANCE: Censure Motions Against PM Go Before Parl't On 16 Oct; PS Stance Crucial
AFP reports that according to its parliamentary sources, censure motions against PM Sebastien Lecornu's second gov't, put forward by the far-left La France Insoumise ('France Unbowed', LFI) and far-right Rassemblement National ('National Rally', RN), are due to go before the National Assembly on Thursday, 16 October. It is viewed as unlikely that either of these censure motions reaches the required 288 votes to oust Lecornu.
- In recent censure motions, those put forward by the RN have generally failed to win support from other parties. The LFI motion could win the backing of the RN and its allies. However, even if the LFI motion can get the backing of the RN and its allies, as well as the Communist bloc and the Ecologists, this would amount to 264 deputies, short of the majority threshold.
- The actions of the centre-left Socialist Party (PS) will prove crucial. The PS has initially indicated that it will not back either the RN or LFI motion, condemning both to defeat. However, the PS' National Office holds a meeting at 13:00CET (07:00ET, 12:00BST), ahead of Lecornu's general policy statement due ~15:00CET (09:00ET, 14:00BST). The PS is set to decide on whether to present its own censure motion against Lecornu, and this could seal the PM's fate. A PS motion would likely go before the National Assembly on the evening of 16 Oct alongside the RN and LFI motions.
- A PS-led censure motion would almost certainly result in the swift removal of the second Lecornu gov't. Additionally, if just 24 of the 69 PS and PS-aligned deputies vote for the LFI censure motion, it would cross the majority threshold (see chart below).
Chart 1. Hypothetical Censure Motion to Remove Lecornu II Gov't
Source: Le Monde
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
