Americans Always Win in the End

The macro point

Every year, it's the same story. When forecasts for the upcoming year are published, economists' consensus is very pessimistic for the American economy and optimistic for Europe. Then, in January, a complete reversal occurs. This is what happened in recent weeks. The consensus now expects U.S. growth in 2026 to be close to 2.5%, while it should barely reach 1.2% in the eurozone. The good news is that in both cases, it is close to potential growth (considered by economists as the ideal growth level in case of full utilization of production capacities). The problem for the eurozone is that it is very weak, notably hindered by stagnant productivity. From 2019 to 2024, cumulative productivity gains in the United States reached 9.4%, while in the eurozone they were only around 2%. This significant gap is largely due to massive American investments in the AI innovation super-cycle, while Europeans are somewhat lagging behind in this area.

If we dig a little deeper, significant disparities exist within the Monetary Union as well. Spain has been the best performer in recent years, with growth of 2.8% in 2025, according to figures released last week. The reasons for the Spanish miracle? A lot of public spending and the help of the post-Covid European recovery, but also an impressive boom in the services sector. Contrary to what one might think, this doesn't just concern tourism. Insurance, business services, and consulting boomed in 2025. It's solid and diversified growth.

To the East, outside the eurozone, it's even more impressive. Forty years ago, Poles expressed this wish: "Poland will be the new Japan." That wish has come true. They are now richer than the Japanese, their industry alone accounts for 25% of the economy, and their growth reached 3.6% last year. Initially, European funds helped, but it was mainly their proper allocation that made the difference. Other Central and Eastern European countries benefited greatly from this, but due to corruption, the economic effects were more modest. Furthermore, their currency, the zloty, is particularly stable against the euro and has withstood all crises of the past twenty years. This is why they are reluctant to join the Monetary Union, even though they meet the membership criteria.

What about France in all this? It is holding up fairly well in light of the fiscal and political instability sweeping the country since the dissolution following the European elections. Its growth isn't dropping, but it remains at a low level. In 2024, it reached 1.1%, then 0.9% last year. In all likelihood, it should be around 1% this year. This level is insufficient to create a virtuous dynamic in the labor market or better distribute wealth. However, no recession is in sight. That's rather good news. A point of concern: if the euro continues to appreciate against the dollar and reaches the area around 1.25 (a credible scenario), it could be a hard blow to exporters.

Technical point

In the foreign exchange market, the EUR/USD suffered from profit-taking – which was expected. The dollar also strengthened slightly benefiting from the current panic over US tech stocks. Investors believe that the software sector could be disrupted by artificial intelligence, hence a sharp decline in the sector's shares. This favored the dollar as a safe haven. It is certainly temporary. The stock market is accustomed to phases of anxiety. We remain convinced that the trend is still positive on the EUR/USD. This is also confirmed by technical analysis.

Many rumors about a possible intervention by Japanese authorities on the yen, which is at a 35-year low against the US dollar and euro. We have suspicions that the Bank of Japan (BoJ) may have intervened on the USD/JPY pair during the session on January 23. But the effect was very short-lived. For the yen to rebound sustainably, the BoJ would need to work in concert with other central banks to implement a coordinated action. Let's be clear, this is not on the agenda. We expect the EUR/JPY pair to continue its upward momentum. Since January 1^st, it is up 0.59%. Over the last six months, the increase is 8.80%.

Finally, watch out for the Swiss franc. If it continues to strengthen, an intervention by the Swiss National Bank (SNB) is likely. Generally, its interventions are quite effective.

Announcements to follow

In terms of statistics, the week is calm. Consumer prices in the United States are the main point of attention. Barring any surprises, they should come out close to their December level at 2.7% year-on-year. US inflation is higher than in other developed economies. It is not particularly a problem because it is in part the consequence of stronger demand than elsewhere. In our view, this should not prevent the Federal Reserve (Fed) from cutting rates twice this semester for a total of 50 basis points. It is already partly integrated by the market.

Finally, the United Kingdom will publish on Thursday its first estimate of GDP for Q4 2025. No significant impact is expected on the foreign exchange market. We expect British politics to continue to weigh on the pound sterling in the coming weeks. On February 26, an important by-election for the ruling Labour Party will take place. According to polls, it could lose the seat at stake to the populist Reform UK party, which might increase pressure on Prime Minister Keir Starmer. Early legislative elections cannot be ruled out after the spring local elections.

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