Different Directions 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 in any case be considered as an encouragement to engage in any investment. The macro point Two weeks ago, we mentioned that not all central banks have the same diagnosis of the state of the economy and will not normalize monetary policy at the same pace. We had the perfect example last week. Unsurprisingly, the U.S. Federal Reserve (Fed) raised its main policy rate by 25 basis points. The rate is now set in a range between 0.25% and 0.50%. The central bank plans to substantially increase its rates this year. The policy rate could be at least 2% next December and then rise to 2.8% the following year. The Fed prioritizes fighting inflation. It must be said that inflationary pressures continue to grow. The producer price index is now in double digits (10% year-on-year in February). Above all, there is no immediate sign of easing inflation. Bottlenecks in international trade have worsened recently with the lockdown of parts of China, energy costs remain significant, agricultural products are at particularly high levels, and the price-wage loop in the United States is strengthening. For now, the U.S. central bank believes the economy is strong enough to withstand a significantly higher cost of money. The risk of recession is minimal according to Fed Chairman J. Powell. The diagnosis made by the Bank of England (BoE) is somewhat different. The institution acknowledged that inflation will continue to rise and could even reach 8% by mid-year. This justified a third increase in its policy rate, from 0.50% to 0.75%. However, several members fear that the surge in energy prices (the UK is a net importer) could lead to an economic slowdown or even a recession. We cannot rule out that after being the first central bank of a major developed country to tighten its monetary policy, the BoE might be the first to pause. Following the BoE's announcement, the euro jumped nearly 70 pips against the pound sterling in just fifteen minutes. The market was surprised. Pressure is also mounting on the European Central Bank (ECB). The era of sluggish inflation is over, acknowledged ECB chief C. Lagarde at a conference in Frankfurt last Thursday. The consumer price index in the eurozone was revised upwards in the second estimate, to 5.9% year-on-year in February (compared to 5.8% in the first estimate). This high figure is concerning because it does not account for the direct effects of the war in Ukraine on energy and agricultural commodity prices. It is feared that inflation will certainly jump close to 6.5% in March. The first estimate will be published in early April. In France, INSEE has already issued a warning. It is quite unusual, which is why we mention it today. The consumer price index could rise from 3.6% in February to 4.3% in March according to the latest forecasts. Furthermore, the institute believes that inflation is already starting to hurt economic momentum (via consumption) and only forecasts growth of around 0.3% in the first quarter of this year. If this should happen, the government's growth target of 4% for 2022 would have to be shelved. At best, we could reach 3%. It's a bit of a rough landing. You will have understood, inflation will be a lasting headache. Central banks will be faced with a dilemma: should they fight the generalized rise in prices at all costs, even at the risk of slowing growth, or should they attempt a fine-tuning (limited rate hikes in particular) without certainty that it will be truly effective? The role of the state also arises. Will we see a multiplication of aid measures like in the era of Covid? On the forex market, the EUR/USD continues to move within a wide range between 1.08 and 1.12. The technical levels (supports and resistances) have hardly changed compared to last week. We do not see what factor could lead to an exit from the mentioned bounds at the moment. The euro has regained some ground against the pound sterling in recent sessions. The BoE meeting we mentioned earlier served as an accelerator. In the short term, the trend is bullish towards 0.8524. The same scenario prevails for the EUR/CHF. The upward movement is fueled by significant interventions by the Swiss National Bank on the market (buying euros and selling Swiss francs). The next technical level to watch is at 1.0461. The supports and resistances displayed below respectively indicate the low and high points within which the prices should evolve during the week.SUPPORTSWEEKLYRESISTANCESWEEKLYS2S1R1R2EUR/USD1.06451.08041.11841.1279EUR/GBP0.82260.83100.85240.8599EUR/CHF1.01281.02301.04611.0525EUR/CAD1.35101.37611.42641.4515EUR/JPY123.40127.01134.24137.86This week, the economic calendar is almost empty. The PMIs and the IFO index for Germany should provide a first idea of the possible impact of the war in Ukraine on growth. But it is not certain that this will result in renewed volatility on the forex market. The plunge of the German ZEW index last week had no repercussions on EUR pairs. The situation in Ukraine remains a concern. For now, the forex market is reacting little. However, we are not immune to sudden movements, as we have seen twice since the conflict began. A good currency hedging strategy is more than crucial in these circumstances. Below are the publications and events that are expected to have a major impact on the evolution of currency rates.DAYTIMECOUNTRYINDICATORWHAT TO EXPECT?23/0309:30Manufacturing and Services PMI (March)Important statistic. This will allow measuring the impact of the war in Ukraine on the eurozone's largest economy.25/0310:00IFO Business Climate Index (March)First publication. Analysts' consensus expects a slight decline to 96.5 from 98.9 in February. The anticipated decline is largely attributable to the war in Ukraine.