Dependent Europe The information presented in this publication is provided purely for informational purposes and does not constitute investment advice, a sales offer, or a purchase solicitation, and should not be used as a basis or taken as an incentive to engage in any investment. The macro point Attempt of a technical rebound of the euro against several of its counterparts. But this is essentially speculative buying flows that are not intended to reverse the underlying downward trend of the euro. Bad news is accumulating on the economic front in the eurozone. However, the deterioration of the situation on the Ukrainian front must also be considered, which could also affect the euro's exchange rate in the future. As the European elections in June approach, we will hear the same discourse everywhere: a need for an independent and strong Europe. The possibility of Donald Trump's election in the United States should be a powerful element favoring an independence strategy. It's off to a bad start when you look closely at the numbers. Europe is militarily dependent on American power (nuclear shield). This is known. It is also now dependent on American energy: American liquefied natural gas has replaced Russian gas following the invasion of Ukraine two years ago. This is recent but certainly lasting. However, it is less known that Europe is dependent on the United States in terms of demand. Eurozone exports to the United States represent double those to China. In 2023, they reached 450 billion euros compared to around 200 billion euros to China. Part of the trade with the United States is inflated due to the tax evasion strategies of American pharmaceutical companies that produce their patent-protected drugs in Ireland and resell them at prohibitive prices in the United States. But this explains only part of the increase. If we look, for example, at American demand for European automobiles and auto parts, the increase is staggering. This dependence has an immediate effect on the trade balance by increasing its surplus. Economic research tells us that this is positive for the euro, in theory. In reality, it's more complicated. While in the past, the European trade balance surplus could have been an explanatory factor for the strength of the euro, this effect no longer really plays out currently. There are too many macroeconomic factors structurally penalizing the euro at the start of the year. The major economies in the zone are close to recession. In France, the growth forecast has been drastically revised downwards from 1.4% to 1% this year. But this is certainly still optimistic. The growth carryover for 2024, which provides an idea of the economic activity profile, is only 0.1%. This is extremely low. Above all, it's quite unclear what will drive activity in the coming months. Perhaps further slowing inflation will encourage households to spend a little more. This is not certain. The increase in purchasing power is only expected to be +1% in 2024. Maybe the European Central Bank (ECB) rate cuts will finally allow for greater dynamism in the real estate market. It is possible. But let us not forget that fiscal policy will be more restrictive this year, and therefore a lesser support factor for growth. In short, it's not a given. Foreign investors have understood this well. After hoping for an economic outperformance of the eurozone compared to the American economy in 2024, which had supported the euro's rebound at the end of 2023, they had to revise their strategy. All indicators confirm that this optimistic scenario will not materialize and that American growth will be much stronger than on this side of the Atlantic. In this context, investors have had a net selling position on the euro since the beginning of the year. As things stand, we do not see what could reverse the trend. However, there is a lot of potential bad news on the European front that has not been priced into the euro – such as the possibility of a Ukrainian defeat to Russia. This is no longer a far-fetched hypothesis. Technical point In the immediate future, there are no notable trend changes in the currency market. The euro has recently attempted a technical rebound against several currencies, including the British pound, the US dollar, and the Canadian dollar. But there is little chance it will be sustainable, in our opinion. These are essentially speculative flows. We remain bearish on the EUR/USD, in particular. In Asia, the yen continues to tumble. Japan's entry into recession does not help the Japanese currency. Exports are the only driver of the archipelago at the moment. Quite logically, the currency market considers that Tokyo is satisfied with a weak yen that boosts exports. This should be the case for much of the year. Even a normalization of monetary policy by the Bank of Japan, which is expected by consensus in April, should not change the situation. The supports and resistances displayed below respectively indicate the low and high points within which rates are expected to evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.05901.06221.08121.9045EUR/GBP0.83300.83900.8650.8611EUR/CHF0.93330.94090.96090.9645EUR/CAD1.44051.45001.47221.4790EUR/JPY159.11160.09163.55163.90 Announcements to follow Once again, it's not the densest week of the year. Many European statistics will be confirmations of the first estimates (such as inflation in the eurozone in January). The core PCE index for the United States will be the only major focus, in our view. It's one of the two statistics on inflation dynamics that the Federal Reserve (Fed) closely monitors, along with inflation in services excluding rents. Regarding the foreign exchange market, we expect the main trends to remain unchanged. Always be mindful of geopolitics even if it has caused few disturbances lately. Below are the publications and events that should have a major impact on the evolution of exchange rates.DayTimeCountryIndicatorWhat to Expect?02/27/202416:00USAConference Board Consumer Confidence (February)Previous at 114.8.02/29/202414:30USACore PCE Index (January)Previous at 2.9% year-on-year.03/01/202411:00EURConsumer Price Index (February)Latest estimate. No change from the previous (2.9% year-on-year).