Difficult Return from Vacation The information presented in this publication is purely for informational purposes and does not constitute investment advice, a sales offer, or a purchase solicitation, and should not in any way serve as a basis or be considered as an inducement to engage in any investment. The macro point The awakening may be harsh if you haven't paid attention to the developments in the economy and markets during the summer period. Stock market crisis, economic downturn, some even talk of a risk of recession. We are not there yet, in our opinion. Nevertheless, the economic slowdown is noticeable and it could be more significant in France than elsewhere. Sometimes, in summer, it's essential to brace oneself. That's what happened this year with financial markets, especially stocks, experiencing significant turbulence. Except for the JPY pairs, the foreign exchange market was fortunately calmer. The culprit is a deteriorating macroeconomy. The quarterly results of listed companies were disappointing. Analysts had not anticipated the slowdown in consumption affecting all sectors and all geographical areas. Even McDonald’s, which is somewhat a barometer for measuring the state of the American economy, performed poorly with a notable decline in its sales in the second quarter. Negative point: this may persist. Should we panic? No. The word 'recession' was on the lips of many analysts and economists in recent weeks. Yet, this risk is not credible at all at the present moment. We are still facing a scenario of a soft landing, that is, a slowdown in economic activity. Furthermore, the market often misinterpreted certain economic data, leading to violent movements in a situation where liquidity is scarce. This is the worst for financial markets. For example, market operators panicked following the rise in the unemployment rate across the Atlantic in July. The reality is that this statistic was biased due to the impact of Hurricane Beryl, which struck Texas at the beginning of July. The unemployment rate automatically increased due to the rise in temporary layoffs. But it is not expected to last. Moreover, other indicators on the American labor market at the same time presented a much more nuanced view. Simply, almost no one wanted to pay attention to it. We do not in any way think that the American Federal Reserve (Fed) has delayed too much in lowering its rates. A first cut this month, certainly by 25 basis points, seems appropriate given the evolution of the economic situation and considering the political calendar. Across the Channel, as expected, the Bank of England (BoE) has begun its cycle of rate cuts. It is unlikely that it will decide to lower its rates at every monetary policy meeting because there is a significant risk that inflationary pressures will strengthen by the end of the year and push inflation slightly above 2% again. Moreover, inflation in services remains an issue, as in many developed countries. It is significantly over 5% in annual variation. However, currency traders are positive about the pound sterling. Since mid-July, a shift to buying is observed in the data published by the American CFTC (American Securities Exchange body). In France, the economic situation also aligns with a soft landing, even though the political uncertainty resulting from early legislative elections could negatively impact the growth dynamic. Activity remained strong in the second quarter (GDP increase of 0.3%), but this is mainly due to exceptional factors, such as the Olympics. The true drivers of growth, which are business investment and consumption, are stalling. This has consequences on the labor market. For about two years now, a slow decline in hiring declarations has been observed. It suddenly accelerated in June. There are now real threats weighing on net job creations. Given France's complicated budgetary situation, a sharp slowdown in public spending is also expected in the coming months and especially in 2025. Therefore, there is nothing very encouraging regarding the French macroeconomy at this reentry. The hardest is certainly yet to come... Technical point In the foreign exchange market, it's mainly the yen that moved a lot during August. Investors, particularly American funds, which had been positioned for months on the sell side, abruptly switched to buying following the rate increase decided by the Bank of Japan at the end of July (another one is expected by the end of the year). If we look at the real effective exchange rate (which allows us to know if a currency is overvalued or undervalued compared to another), the yen is still very weak. But it is improving, and it's not excluded that the Japanese currency continues its appreciation phase. As for EUR/USD, there have been some attempts by the euro to regain the upper hand. In vain. The strong dollar remains the norm. The supports and resistances displayed below indicate, respectively, the lowest and highest points within which the courses should evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.07331.08221.11191.1190EUR/GBP0.83000.83220.85900.8612EUR/CHF0.93110.94330.98020.9901EUR/CAD1.47981.48331.52301.5300EUR/JPY157.88158.11163.99165.50 Announcements to follow This fall, the economic schedule is not very busy. The market anticipates that the Bank of Canada (BoC) will lower its key rate at every meeting until the end of the year. This means that the key rate could reach 3.5% in January 2025 and even 3% by mid-2025, according to money market expectations (which are subject to fluctuation based on statistics). It is already partially integrated into the market prices, so we doubt that the BoC meeting will cause much volatility in the CAD pairs. Note that the Fed and the European Central Bank (ECB) will also cut their rates this month. Again, this is already anticipated. Finally, regarding France, the government will have to present a corrective plan for the budgetary situation by September 20 to return to a sustainable long-term deficit target. This will be very complicated. It implies drastically cutting expenses... and maybe also raising taxes. Nothing good for growth, in any case. Below you will find the publications and events that are expected to have a major impact on currency rate developments.DayTimeCountryIndicatorWhat to expect?09/04/202416:00CANCentral Bank MeetingNew key rate cut of 25 basis points.