A Tense Situation The information presented in this publication is provided to you purely for informational purposes and does not constitute investment advice or an offer to sell or a solicitation to buy, and should not under any circumstances serve as a basis or be considered an incentive to engage in any investment. The macro point Despite events in the Middle East, volatility has been contained so far in the foreign exchange market. No one is able to know what will happen in the coming weeks. However, Iran's launch of ballistic missiles targeting the Israeli civilian population clearly constitutes an escalation… which could lead to an uncontrolled spiral. In this context, it is advisable to adjust currency hedging, if necessary by increasing exposure to currencies that play a safe haven role. Since September 23, China has announced massive measures to revive its economy—or more precisely to stabilize its stock market and real estate sector. Financial markets applauded. The local stock market has rebounded sharply—with some indices rising by more than 30% in just four days! This has obviously supported global markets. Even industrial metals, which were rather on a downward trend due to concerns over the Chinese economy, have experienced a significant rise in recent days. Is this sustainable? Will China, which faces immense macroeconomic challenges, finally return to sustained growth? This is what many investors believe. We are skeptical. The announced measures will scarcely spread throughout the economy and are insufficient to sustainably restore the confidence of Chinese households. Moreover, the surge in Chinese stocks is artificial and does not rest on solid foundations. One example: Beijing has asked local banks to provide loans at a reduced rate of 2.25% to listed companies for stock buybacks. This is, obviously, not healthy. It is also reminiscent of the 2015 stock market bubble, which was partly due to the systematization of margin loans. With the blessing of the authorities, brokers allowed retail investors to use their stocks as collateral to finance new stock purchases despite an obvious economic weakness. We know how that ended… a fall in Chinese stocks and strong turbulence in currencies. Caution. The Chinese economy is far from being healthy. Fortunately, there is good news at the end of this year that should make us slightly more optimistic than expected for global growth, especially for 2025. Energy prices (oil, gas, electricity, gasoline) are falling everywhere, in France and in all other European countries. The price of a barrel of oil, which influences prices at the pump, has dropped by 3% since the beginning of the year, for example. Moreover, investors consider that prices will continue to fall. For the first time since 2011, they are positioned to sell oil. The situation is similar for gas. Added to this is the decision of the European Commission to reduce the regulated electricity price (the blue tariff) by 10% from February 1, 2025, which should benefit 60% of the French population. Admittedly, the decline in prices on global markets is often explained by weaker-than-expected demand. But it's better to see the glass half full rather than half empty. The fall in energy prices constitutes an underlying trend that will support economic activity in the coming quarters. We will indeed need it! Technical point In the foreign exchange market, the Iranian attack with ballistic missiles against Israel has caused a slight resurgence of risk aversion. The Israeli shekel lost 0.48% of its value against the euro on October 1st. The Swiss franc and the Japanese yen, unsurprisingly, rebounded. Both currencies capitalize on their safe-haven role. However, the increase in risk appetite was limited in scope. Rightly or wrongly, traders believe that the escalation of tensions in the Middle East should not lead to an open conflict because "none of the parties wants that." It's true. But one cannot deny that a slip-up is quickly possible. The launch of ballistic missiles is not a trivial signal – they take less than 12 minutes to strike Israeli soil from Iran. Especially, Iran has this time clearly targeted the civilian population. The worst is never certain. But it is better to protect oneself and adapt one's currency hedging – notably by being more exposed to safe-haven currencies. Once again, there is no reason to panic for now. The supports and resistances displayed below indicate the low and high points within which the prices should evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.09221.09551.11901.1211EUR/GBP0.82550.83000.83900.8420EUR/CHF0.92880.93010.94550.9587EUR/CAD1.47391.48221.50231.5133EUR/JPY157.11157.88161.53162.10 Announcements to follow This week is rather quiet in terms of statistics. The U.S. Consumer Price Index is expected to continue its decline in September. Inflation is no longer a concern for the Federal Reserve, which now focuses on the labor market. Given the evolution of the two-year U.S. bond yields, which are not administered by the central bank, the foreign exchange market seems to anticipate another 50-basis-point rate cut in November. But this is not yet certain. More statistics will be needed to determine if another significant cut is possible. Below you will find the publications and events that should have a major impact on currency movements.DayTimeCountryIndicatorWhat to expect?10/10/202414:30USAConsumer Price Index (September)Previous at 2.5% over a year. 11/10/202414:30USAProducer Price Index (September)Previous at 0.2% over a month.