American Recession? The information presented in this publication is provided solely for informational purposes and does not constitute investment advice, a sales offer, or a solicitation to buy, and should not serve as a basis or incitement to engage in any investment. The macro point The euro has slightly benefited in recent sessions from euro-denominated asset purchases by investment funds. However, the underlying trend remains bearish. European macroeconomics shows obvious signs of weakness: Germany is struggling, the manufacturing sector is contracting, and France faces political difficulties. The strong dollar remains the norm. According to us, it is overvalued by 9% compared to the currencies of the USA’s main trading partners. Regularly, the same fears resurface in financial markets. The recession is a perfect example. Following disappointing employment figures in July and a disappointing manufacturing PMI index published last week, the specter of recession has re-emerged. According to the money market, the probability of a recession in the United States within a year is 41%. That's high... too high when you look closely at the state of the American economy. Consumption – the main driver of the economy across the Atlantic – is doing very well. The latest retail sales have shown it. Certainly, the savings rate is plummeting. But this is not really a problem for American households who no longer really need to save: the average salary has jumped in recent years, those owning stocks (and there are many!) have seen their values rise sharply and homeowners now own properties whose value has greatly increased since Covid. In a word, they are rich! This is nothing like the situation of European households, which is much less rosy. This explains why hotel occupancy rates are very high, why Broadway shows are full, and why air traffic has never been busier. Obviously, the economy is slowing down. This is normal at this stage of the cycle. The beneficial effects of stimulus measures (Inflation Reduction Act and Chips Act) are gradually fading. But everything suggests that a recession is still a distant danger. The market loves to scare itself! This could have significant implications for monetary policy. The money market estimates that US Federal Reserve (Fed) rates will drop by 100 basis points by the end of the year. There are only three Fed meetings left. This suggests it decides on a 50 basis point rate cut at one meeting. Unlikely. We think the Fed has no reason to rush. The strategy of small steps suggests making only 25 basis point rate cuts. Altogether, in 2024, the rate cut will only be 75 basis points, according to us. Technical point In the foreign exchange market, the euro has slightly benefited from the decrease in US bond yields in recent days. Specifically, investors (like investment funds) are withdrawing some of their dollar-denominated assets because the yield decreases and placing it elsewhere, for example, in euro assets. This is a common arbitration that, when involving significant capital flows, can really impact the foreign exchange market. However, this does not challenge the underlying bearish trend for the euro. As long as European macroeconomics show signs of weakness, it is unrealistic to forecast an EUR/USD pair at 1.15, for example.The supports and resistances displayed below respectively indicate the low and high points within which prices should evolve over the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.07991.08901.11551.1201EUR/GBP0.83010.83110.84900.8500EUR/CHF0.92880.93000.95900.9611EUR/CAD1.47881.48221.50231.5222EUR/JPY157.43158.33161.99162.33 Announcements to follow This week is particularly busy. The first debate between K. Harris and D. Donald Trump is scheduled for September 10. These are two diametrically opposed visions of society facing off. Harris's vice-presidential candidate, T. Walz, advocates for a "garden economy" (as opposed to the "jungle economy" that Trump would like). According to him, "the idea that you are somehow more fiscally responsible by NOT investing in education, healthcare, and transportation is an appealing political argument, but it makes no sense. Especially when we could have a better-educated, healthier workforce living longer, etc." In summary, it's a form of European social democracy that, however, has never managed to take root across the Atlantic. At this stage, it is obviously difficult to know who will prevail. Harris is slightly ahead in the latest projections... but the gap is still very insufficient to guarantee her victory. Regardless of who will be in the White House in 2025, some characteristics of the American economy are unlikely to change: the deficit should remain high (around 5% of GDP), labor immigration will remain significant, there will certainly be no massive new stimulus plan in the absence of political consensus (e.g., a Chips Act II), and the American government should continue to resort massively to protectionism and economic sanctions. About a third of the countries are subject to some form of American economic sanctions. That's huge. In other news, US consumer prices in August will be the last major important statistic before the FOMC meeting. Barring surprises, a 25 basis point rate cut is still the consensus. The reduction should be of the same magnitude in the euro area this Thursday. However, voices are beginning to rise in the public debate to push the European Central Bank to act faster and stronger in view of the economic slowdown underway on the continent. Not sure these calls will be heard in Frankfurt...Below you will find the publications and events expected to have a major impact on currency price trends.DayTimeCountryIndicatorWhat to Expect?09/10/2024TBDUSAFirst Presidential Debate09/11/20242:30 PMUSAAugust Consumer PricesConsensus at 2.9% year-on-year.09/12/20242:15 PMEURCentral Bank Meeting25 basis points rate cut09/12/20242:30 PMUSAAugust Producer PricesPrevious at 0.1% month-on-month.