Error The information presented in this publication is communicated to you for informational purposes only and does not constitute investment advice, a sales offer, or a solicitation to buy, and should not in any way serve as a basis or be considered an incentive to engage in any investment. The macro point It's done. The ECB has lowered its key interest rate by 25 basis points. In an ideal world, it would have reduced the cost of money by 50 basis points. This would have somewhat helped domestic consumption. More importantly, it would have been a breath of fresh air for commercial real estate. We will have to settle for economic stagnation. It was expected. The European Central Bank (ECB) lowered its main key interest rate by 25 basis points last Thursday. The door is open to future rate cuts. We think it will continue the easing process at the same pace at least until next spring. However, it should have moved much faster. While the German economy is in recession, the manufacturing sector is collapsing, and the cost of energy is four times higher in the eurozone than in the United States, the ECB continues to worry about a possible wage-price spiral in services that no economist perceives anymore. Last February, there were some statistics that could suggest that wage inflation might be a problem. Today, that is no longer the case at all. We might even think that the decline in the consumer price index over several months mainly reflects compressed demand. As in the past, the risk is high that the ECB is lagging behind the economic cycle. This does not mean that a recession is imminent. This is not our central scenario. However, the continuation of economic stagnation, in which we have been entangled for years, seems inevitable. But there is worse. By refusing to lower the cost of money more sharply as the US Federal Reserve (Fed) did in September, the ECB also risks an accident in the commercial real estate segment, which has been in crisis since Covid. Recently, the central bank conducted a survey among the main banks in the eurozone to assess their balance sheet exposure to commercial real estate and to see if the assets in question are valued at a price in line with market prices. To say the least – while remaining politically correct – a major cleanup remains to be done. We know that real estate is one of the most sensitive economic sectors to rate cuts. For example, residential real estate loans in France have significantly decreased since June, reaching an average of 3.20% over twenty years. A 50 basis point cut last week would have provided significant and rapid relief to commercial real estate, which we see as the main systemic risk weighing on the eurozone at the moment. It's a much more significant risk than state debt. Why? Because this risk is poorly assessed on banks' balance sheets. It was the same issue, remember, during the subprime crisis. American real estate loans were then poorly valued in the banks' books, leading to significant losses, a liquidity crisis in the markets, etc... The rest is well known. We are not saying that a systemic crisis linked to commercial real estate is imminent. We don't know. Nevertheless, it is clear that by being too cautious, focusing on lagging indicators in relation to the cycle, the ECB is making bad monetary policy decisions. In the best case, this will cost us growth points. In the worst case, it could precipitate a crisis. Technical point On the foreign exchange market, the eurozone rate cut constitutes another argument to position for a sale on EUR/USD. We reiterate our short-term target at 1.08. Note that short positions held on the U.S. dollar continued to decrease last week, according to the CFTC's Commitment of Traders* report (which we review every week). We remain convinced that a strong dollar will remain the norm in 2025. But expect the usual resurgence of volatility around the U.S. presidential election. The market is just beginning to factor in the risk of a Trump presidency (sharp drop in the Mexican peso, for example). The supports and resistances displayed below indicate the low and high points within which the rates should move during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.07881.08001.10151.1090EUR/GBP0.82740.83100.84140.8488EUR/CHF0.92840.93100.94100.9488EUR/CAD1.47981.48231.51221.5190EUR/JPY159.14159.98163.11163.45 Announcements to follow It's the Bank of Canada's turn to be in the spotlight this week. The latest good employment figures in Canada argue in favor of a 25 basis points cut – no need to rush. However, a minority of economists expect a larger cut of 50 basis points. That seems unlikely to us. The impact on the CAD should remain minimal. The EUR/CAD pair remains in an upward trend. Note that the positive correlation between the Canadian dollar and oil is not working. Despite the rise in black gold following tensions in the Middle East, the CAD is still sluggish. PMI activity indicators should, for their part, confirm the good health of the U.S. economy. The services sector is resilient, supported by consumption, while the manufacturing sector is contracting due to poor global dynamics. But no reason to panic. Finally, the IFO business climate index in Germany should hold no surprises. The German economy is expected to be in recession for 2024 and probably next year. This is a problem for EUR/USD in the long term (U.S. economic outperformance against the economic sluggishness in the eurozone). Below you will find the publications and events that should have a major impact on currency rate developments.DayTimeCountryIndicatorWhat to expect?10/23/202415:45CANCentral bank meetingPrevious interest rate at 4.25%.10/24/202415:45USAManufacturing PMI (October)Previous at 47.3 (in contraction).10/25/202410:00ALLIFO business climate index (October)Previous at 85.4.