Cold Shower 2 The information presented in this publication is communicated to you for information purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should under no circumstances serve as a basis or be considered as an incentive to engage in any investment. The macro point It is in Asia where attention should be focused in the coming weeks. In Japan, the authorities are hinting at a possible intervention to curb the depreciation of the yen. In China, the government is sending mixed signals concerning its intentions for the yuan – depreciation or appreciation, it's uncertain. Beware of the return of volatility! Bad news is piling up for Europe. The main German economic institutes have sharply revised downward their growth forecasts for the largest economy in the eurozone, to 0.1% in 2024. This is a hard blow. It confirms that Germany's problem is structural and not merely cyclical. The country needs to find a new business model that is compatible with higher energy prices and redirect its export sector, which remains heavily dependent on Chinese demand. This will take several years. In France, growth is typically weak. This will likely be the case again this year. The problem is the soaring public deficit. It reached 5.5% in 2023 and everything indicates that 2024 will also be complicated. To tackle such a deficit, there are only three solutions: growth increase boosting revenues (unlikely), spending cuts (yes... but difficult), and tax hikes. It is certainly this last solution that will prevail. Expect corporate taxation to rise again. Clearly, the target to reduce the public deficit to 3% of GDP by 2027 is unattainable. Everyone suspected this. Unsurprisingly, rating agencies will penalize France this month. In this tense budgetary and economic context, it's hard to see how the euro could outperform the US dollar this year. Recall that this was the scenario put forward by many analysts in recent months. They were mistaken. On the other side of the Atlantic, everything, or almost everything, is going well. The consensus among economists expects a no-landing scenario for the US economy (no recession). Growth is expected to be close to 2.2% this year while inflation expectations are at 3%. All this validates the scenario of a rate cut by the Federal Reserve (Fed) starting in June, but to a small extent since there is no urgent need to support the US economy. J. Powell, its president, plans three rate cuts this year totaling 75 basis points. This also corresponds to our expectations. It is consistent. We do not think, at this stage, that this should negatively impact the US dollar. The strong dollar should be a constant in 2024. Economically, China is the main uncertainty of the current year. Clearly, there will be no major fiscal stimulus package. The goal is to avoid injected money into the economy fueling bubbles and shadow banking. But it's hard to see what China wants for its currency. In recent months, the yuan has tended to weaken – logically because this allows for a boost to exports, the main driver of the economy. However, for about a week, China, through state commercial banks, has intervened to support the yuan, which had crossed the 7.20 threshold against the US dollar. It seems – and we say this with the utmost caution – that Beijing wants to stabilize the USD/CNH pair around this level in the short term. Therefore, caution is advised. Instability of the Chinese currency has consistently translated into global economic and financial upheavals in the past. Finally, a quick word on the Australian dollar. Traders have never been so heavily invested in shorting the Australian dollar, according to the latest data from the weekly Commitment of Traders report by the CFTC (the equivalent of the US Securities Regulator). This is unprecedented. The uncertainty surrounding Australian monetary policy largely explains the investors' bearish bet. The last central bank minutes highlighted that a rate hike is just as possible as a rate cut. This also reminds us that the battle against high inflation is, in certain areas, more complicated than initially expected. Technical point In the foreign exchange market, the streak of losses continues for the EUR/USD: down 0.61% in a month and 2.36% since the beginning of the year. The poor European macroeconomy partly explains the euro's woes. We continue to think that a return of the pair towards 1.670-80 is possible in the short term. However, it is not on the EUR/USD side that volatility could be the highest in the coming sessions. Japanese authorities are increasingly concerned about the yen's weakness – which we have mentioned many times. For now, Tokyo is limited to verbal interventions that have not had the desired effect. One cannot exclude direct intervention in the exchange rates (buying yens and selling dollars). You must be very aware of this risk if you are exposed to the yen. The supports and resistances shown below indicate the low and high points within which prices should evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.06011.06781.09891.1055EUR/GBP0.84000.84120.86120.8701EUR/CHF0.94900.95910.98900.9912EUR/CAD1.45011.4601.48551.4922EUR/JPY159.44161.11165.12166.00 Announcements to follow There is an important figure this week, which is the March inflation in the eurozone to be released on Wednesday. A sharp decline could reinforce the possibility of a rate cut by the European Central Bank (ECB) this month. The March inflation figure in Spain, released last Wednesday, is, in any case, encouraging. Core inflation (excluding volatile elements) came in at 0.5% month over month – slightly below its long-term average (0.6%). As the ECB recently indicated, the supply shock was the main driver of inflation increase in the Union. This has now ended. This opens the door for a welcome easing of monetary policy that could provide some relief to the real estate sector, investment, and consumers. We still anticipate the start of the rate-cutting process in June, alongside the US Federal Reserve and the Bank of Canada. Below you will find publications and events likely to have a major impact on the evolution of currency prices.DayTimeCountryIndicatorWhat to expect?04/01/202415:00USAISM Manufacturing Index (March)Previous at 47.8.04/03/202413:15USAADP Private Employment Survey (March)Previous 140k.04/05/202413:30USADepartment of Labor Employment Report (March)Previous at 275k.