Back to School Week The information presented in this publication is provided for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should not be used as a basis or considered an inducement to engage in any investment. The macro point Back-to-School Week The Macro Point When we parted ways a month ago, concerns about the Delta variant were intensifying, but the economic recovery continued both in the United States and in the eurozone. Against this backdrop, more and more questions were arising concerning the observed rise in inflation linked to the increasing cost of intermediate goods. In the end, concerns about the Delta variant were probably exaggerated. Even though there is a slowdown in the number of appointments booked on Doctolib for a first vaccine dose in France, vaccine coverage is high in the country. As of August 26, 59.7% of the population had received both vaccine doses and 73.9% had received at least one first dose. We are still far from the herd immunity threshold, which is set between 70% and 75% of the population according to studies. However, a national lockdown in the fall can be excluded given the progress made on the vaccination front. Moreover, the presence of the Delta variant does not seem to harm economic activity. High-frequency indicators on mobility provided by Google indicate that activity in the country has nearly returned to its pre-pandemic level. Specifically, the number of store visits is only 3% lower than in February 2020. The economic recovery continues but with differences on both sides of the Atlantic. The United States is ahead in the cycle compared to the eurozone, so it is no surprise that the latest American indicators highlight a slight slowdown in the recovery dynamic. The GDP for the second quarter came out slightly below consensus, at 6.6%. This is still an impressive performance. Moreover, the job market shows some signs of weakening if we refer to the weekly unemployment claims. During the week ending August 22, they slightly increased to 353,000 (+4000 in a week). This will not, however, prevent the Federal Reserve (Fed) from initiating a very gradual normalization of its monetary policy in the coming months by starting its tapering process. On the eurozone side, optimism prevails, including within the European Central Bank (ECB). The publication last week of the minutes of the Governing Council meeting of July 21 and 22 leaves no doubt about this. The ECB is expected to revise its growth outlook upwards at its early September meeting. However, no change in monetary policy is expected in the short term according to the consensus of economists. Lastly, the latest theme this fall is inflation. Central banks in developed countries continue to assert that the rise in inflation is temporary. Meanwhile, more and more central banks in emerging countries (for example, the Bank of Korea last week) are raising their rates to fight inflationary pressures. In the United States, inflation has reached a level not seen since 1983. The core PCE index, which is closely followed by the Fed, reached 6.1% in the second quarter. In the absence of a monetary policy change by the Fed and the ECB, we see that the rising cost of intermediate goods is starting to pose serious problems at the supply chain level. Often, subcontractors are forced to absorb this price increase by cutting their margins (in the automotive sector, for example). But if inflation were to remain sustainably high, price increases could also be passed on to consumers. This is not the case yet, but it is something to watch. Technical point On the foreign exchange market, the Jackson Hole Symposium, during which all important Fed members spoke, caused some volatility. However, it did not lead to a change in direction for the main currency pairs. The US dollar is expected to be the big winner of the tapering in the coming months. For the EUR/USD pair, this should result in a decrease towards the support area of 1.1602 (this is the main technical level considered by the market). It is also noted that in the trading rooms of brokers and major banks, a medium-term target for the EUR/USD at 1.15 is increasingly mentioned.The supports and resistances displayed below respectively indicate the lows and highs within which prices are expected to move during the week.SUPPORTSWEEKLYRESISTANCESWEEKLYS2S1R1R2EUR/USD1.15841.16021.18601.1999EUR/GBP0.84010.84470.86250.8664EUR/CHF1.06001.06201.08041.0880EUR/CAD1.45371.46001.51601.5218EUR/JPY127.02127.73131.00131.89For personalized advice on trends and currency hedges, contact our trading desk: Announcements to follow This week, inflation and employment will be at the heart of concerns on the foreign exchange market. Confidence and activity indicators in the United States should confirm that inflationary pressures are indeed present and strengthening in certain market segments. On the labor market side, US employment is expected on Friday at 2:30 PM. The consensus expects a number of new positions created in August slightly under 800,000 – which is lower than levels reached in June and July (close to 900,000). However, this does not call into question the Fed's tapering strategy.Below you will find publications and events that should have a significant impact on the evolution of exchange rates.DAYTIMECOUNTRYINDICATORWHAT TO EXPECT?08/3111:00CPI (August)Expected increase to 2.5% year-on-year versus 2.2% previously.16:00Conference Board Consumer Confidence (August)Expected new decline to 124, likely due to inflation concerns.09/0114:15ADP Employment Report (August)The job market remains dynamic with 575,000 new jobs expected by consensus.16:00ISM Manufacturing Index (August)Almost stable at 59.2 (in expansion phase).09/0314:30US Employment (August)Strong job creation expected at 725,000 and a decline in the unemployment rate to 5.2% of the workforce.16:00ISM Non-Manufacturing Index (August)Slight decline to 63.0 versus 64.1 previously.Did you enjoy this content? Share it!