A Little More Patience The information presented in this publication is communicated to you for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should not in any case serve as a basis or be considered as an incentive to engage in any investment. The macro point We are not part of the doomsayers. The electoral process in France weighs much less on the forex market than is being said. Investors believe that the budgetary constraint will be such for the next government that it will have to temper its policies. This is also our opinion. As we anticipated, the electoral campaign in France has little impact on the forex market dynamics. Investors, especially foreign investors, consider that the budgetary constraint in France is such — public deficit exceeding 5% this year — that the next government will have no choice but to temper its policies. Last Wednesday, France entered into the European excessive deficit procedure. For now, the European Commission is not demanding concrete efforts — next fall will be the time to present measures for expense reduction and possibly tax increases. We believe that foreign investors will continue to stay away from the euro, out of caution. But we do not anticipate a panic... let alone a debt crisis (as mistakenly mentioned in the media in recent days). The risk for France is mainly to enter a cycle of activity compression due to the bill left by Covid and the 'whatever it takes' approach which, in retrospect, may not have been such a good idea. The real focus last week for currency traders was the United Kingdom; for once. British inflation reached 2% year-on-year in May. Mission accomplished for the Bank of England. The United Kingdom joins the coveted club of countries that have returned to their target or inflation band, like Canada, Switzerland, Indonesia, the Czech Republic, India, South Africa, and Brazil. There are still one or two components of inflation at somewhat high levels. However, this does not at all undermine the start of a rate cut process in August (expect -25 basis points). Consequently, the pound sterling rebounded. On the mainland Europe side, the Vice President of the European Central Bank (ECB), De Guindos, indicated that a new rate cut in the eurozone would be appropriate when economic projections are updated in September. We believe a 25 basis points cut will occur — the second of the cycle. This is already priced into the market, by the way. The only uncertainty concerns the start of rate cuts by the US Federal Reserve (Fed). Third or fourth quarter? It's hard to know. However, this does not seem to overly concern investors. As long as the US economy holds, and it holds well, a rate cut is not urgent. American economic exceptionalism should continue to support the dollar in the medium term. How to explain such resilience? A massive public deficit channeled towards productivity growth (the exact opposite of France), a lower average electricity price than in other developed economies, expanding demographics, and a technological lead in artificial intelligence. Under these conditions, it's difficult to be pessimistic about the greenback. Finally, in Japan, the weak yen remains the norm. The Bank of Japan (BoJ) will start slowing asset purchases from July — which constitutes a form of monetary tightening. However, it does not seem in a hurry. It's normal. The archipelago's economy needs a weak yen to remain competitive. Let's recall that in the last two quarters, it was mainly exports — and thus the weakness of the exchange rate — that drove economic activity. As long as domestic demand does not take over, we see no reason why Beijing would need a strong yen. Technical point In the foreign exchange market, the major trends remain unchanged. The dollar remains strong, especially against the euro but also against most emerging currencies. We reaffirm our target of 1.05 for EUR/USD. EUR/CHF rebounded slightly in last Thursday's session following the surprise rate cut decision by the Swiss National Bank (SNB). It seems that the central bank's decision was more justified by the strength of the Swiss franc than by the macroeconomic context. Attention should be paid to further similar interventions by the SNB. The supports and resistances displayed below indicate the low and high points within which rates should evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.05501.06441.08431.0909EUR/GBP0.83120.83880.86730.8699EUR/CHF0.93980.94020.96900.9712EUR/CAD1.44881.45091.48901.4900EUR/JPY167.44168.11171.21171.59 Announcements to follow The election campaign remains a point of attention. Anxious soundbites can cause temporary ripples in certain market segments. When the Economy and Finance Minister, Bruno Le Maire, mentioned on Friday, June 14, the risk of a financial crisis in the event of an RN victory, the euro collapsed. But these market falls are not set to last. We are not among the catastrophists. On the indicators side, the week is calm. The core PCE inflation index for May is expected to come out at 0.2% in monthly variation. This is a statistic closely watched by the Fed. Nonetheless, this will not provide additional information on the timing of the rate cut. Major trends in the currency market should persist. Below are the publications and events that should have a major impact on the evolution of exchange rates.DayTimeCountryIndicatorWhat to expect?06/24/202410:00GERIFO Business Climate Index (June)Previous at 89.3.06/25/202416:00USAConference Board Consumer Confidence (June)Previous at 102.0.06/28/202414:30USACore PCE Index (May)Previous at 0.2% in monthly variation.