A Year of Crises?

The information presented in this publication is purely for informational purposes and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should in no way serve as a basis or be considered an incentive to engage in any investment.

The macro point

The year 2024 will be a year of crises for financial markets. More than 40% of the global GDP risks shifting hands due to elections. Added to this are the numerous conflict zones that continue to emerge (Ukraine, Taiwan, Middle East, Serbia, Pakistan, etc.). All this should rather favor the US dollar. We are very skeptical of the scenario of a sustained bearish cycle of the dollar put forward by investment funds and asset managers. 2024 will be the year of risk aversion and thus the return of the strong dollar, in our opinion. We hope you had a good and restful holiday season. In the forex market, you haven’t missed much, aside from the unusually strong volatility of the Swiss franc that pushed the EUR/CHF to new lows. This doesn’t seem to be related to the intervention of the Swiss National Bank when observing market data. This should be monitored. However, we believe that this strong volatility reflected a seasonality phenomenon. The year ahead is going to be busy. It's a year of crises. Tensions and conflicts are multiplying in a world that is dangerously unstable. The appetites of certain powers are sharpening, and instability is increasing. Here, briefly, are the points to watch in 2024 as they may cause upheavals in financial markets:

Ukraine remains a major point of instability since the invasion launched by Russia in February 2022. The war is bogged down, and each tries to bleed the other. According to official sources, Ukraine should mobilize 500,000 soldiers this year. Russia, on its part, is conducting raids of migrants to send them to the front. This is a crucial turning point for Europe.
While we were celebrating Christmas, Serbia plunged into political instability. The legislative election in December saw the ruling party (considered pro-Russian) victorious, embroiled in affairs of vote-buying and ballot stuffing. Demonstrations are regular, and calls for boycotts are multiplying. All this is happening about two hours by plane from Paris. This is a new front opened with Moscow.
The presidential election in Taiwan this month is obviously to be taken into account. China seems to be pushing to influence the votes in its favor. Of course, there is also the military pressure from Beijing aiming to take control of this territory.
Israel's offensive in the Gaza Strip following the terrorist attacks committed by Hamas on October 7 continues with no diplomatic exit in sight. Hamas refuses all proposals for truce. The conflict polarizes public opinion (on either side) and is a vector of international instability.
On November 5, the American elections will take place in an electric atmosphere. Primaries begin on January 15. It’s impossible to read into a crystal ball to predict the future, but the election constitutes an important international issue, particularly regarding support for Ukraine.

What is certain is that 2024 will be rich in crises and conflicts to follow in an increasingly tense international situation where competition between major powers intensifies. No continent is spared from the risk of instability or worsening of the situation, whether on the security or social level. Public opinions are becoming tense and can tip countries, or even regions, into a dramatic situation. The world increasingly resembles a pressure cooker. With crises also comes mass disinformation, which will need to be particularly watched. With such an international geopolitical situation, volatility, which was relatively contained in 2023, is expected to resurface. This will not necessarily mean a global resurgence of volatility. We rather anticipate volatility rebounds here and there depending on tension points (much like what happened with the Israeli shekel following terrorist attacks). This is an international environment that is theoretically more favorable to the US dollar. Investment funds and asset managers are betting on the start of a bearish dollar cycle in 2024. This is clearly not our central scenario. In the face of an unstable world, the dollar will serve as a safe haven for many companies and market players. In short, the year 2024 for the forex market seems to be that of the return of risk aversion.

Technical point

In the short term, few movements in the foreign exchange market. This is quite normal at this time of the year. The EUR/CHF pair, after its sharp drop during Christmas, has stabilized around 0.93. The EUR/USD, on the other hand, is a few pips from the psychological zone at 1.10. The euro has also regained the upper hand against the Japanese yen (+1.79% since the beginning of the year). Traders have understood that the Bank of Japan will finally not modify its monetary policy for the moment. This means the depreciation of the JPY should continue. Finally, the pound sterling is showing an increase at the beginning of the year (+0.44% against the single currency) due to the possibility that the European Central Bank will lower its rates well before the Bank of England. Be careful, it is not certain that this movement is sustainable. Expectations evolve regularly depending on statistics and central bankers' talks.The supports and resistances displayed below indicate respectively the low and high points within which prices should evolve during the week.

	Weekly Supports		Weekly Resistances
	S2	S1	R1	R2
EUR/USD	1.0733	1.0850	1.1099	1.1150
EUR/GBP	0.8500	0.8534	0.8699	0.8750
EUR/CHF	0.9190	0.9223	0.9432	0.9590
EUR/CAD	1.4440	1.4523	1.4789	1.4900
EUR/JPY	155.20	156.48	159.99	160.90

Announcements to follow

In 2023, all traders' attention was focused on inflation. Now that we know the disinflation process is well underway and a return to central bank targets is credible in the medium term, it is likely that inflation figures will attract less interest. Traders will now rather watch the growth trajectory, particularly unemployment figures across the Atlantic, which remain very solid as shown by the NFP report from the Department of Labor for December. Of course, in the background, political risk is always there and threatens to shake up a number of exchange rates.Below you will find the publications and events expected to have a major impact on currency developments.

Day	Time	Country	Indicator	What to expect?
On 11/01/2024	14:30	USA	Consumer Price Index (December)	Previous at 3.1% year-over-year.
On 12/01/2024	08:00	FR	Consumer Price Index (December)	Previous at -0.2% month-over-month.
On 12/01/2024	10:00	USA	Producer Price Index (December)	Previous at -0.4% month-over-month.