Good News The information presented in this publication is provided for informational purposes only and does not constitute investment advice, an offer to sell, nor a solicitation to buy, and should not, in any case, serve as the basis or be considered as an incentive to engage in any investment. The macro point Good newsThe macro pointLet's start with some good news. The European Union has reached the threshold of 70% of the adult population fully vaccinated. France is among the good performers at the European level, after a slow start to the vaccination campaign. According to the figures released last Friday, 72.3% of the inhabitants (total population) have received at least one dose and 66% are fully vaccinated. Despite the virulence of the delta variant, it seems increasingly evident that a lockdown after the summer (from October as last year) is now completely ruled out. Economic activity is picking up in all sectors. The government is gradually moving away from the 'whatever it takes' approach to a more targeted one.Globally, the challenges of crisis exit are numerous: inflation is seeing a significant increase, the American economy is showing signs of weakness, and monetary policy is becoming more restrictive in many countries. In the eurozone, the consumer price index in August exceeded expectations, at 3.0% year-on-year against 2.7% expected and 2.2% in July. This increase should, however, be temporary. It is linked to the rise in the price of raw materials and maritime transport costs, but mainly to base effects. Take France as an example. The consumer price index in August jumped to 1.9% year-on-year. But this is mainly the result of base effects: last year, the summer sales were postponed to August. This was not the case this year, hence an apparent acceleration in the prices of manufactured products (+1.3% year-on-year). Although not expected to last, the phenomenon is to be monitored and is often misunderstood by the population. The German tabloid press is already beginning to raise the specter of hyperinflation. Wrongly.In the United States, economic activity is showing some signs of weakness, as evidenced by the slowdown in the labor market in August (only 235,000 job creations – three times less than the consensus). For us, the two points of concern are consumer confidence and price pressures in the real estate market. Indicators published by the University of Michigan and the Conference Board show that the spread of the delta variant and fears about the inflation trajectory are starting to weigh on household morale. In addition, the continuous rise in real estate prices is preventing an increasing number of Americans from accessing homeownership and is fueling fears of a return of a housing bubble. The Case-Shiller home price reference index experienced its strongest appreciation in June since 1988 (+19.08% year-on-year). These two concerns will certainly be closely monitored by the U.S. Federal Reserve in the weeks and months to come.Finally, the divergence in monetary policy is widening globally. The central bank of Chile is the latest central bank to have announced a sharp increase in its key rate. It was increased in one go by 75 basis points, to 1.5%, to combat inflation that could flirt with 6% year-on-year by the end of the year if the central bank's forecasts are correct. We expect many emerging economies to make significant rate hikes in the coming months, which could support emerging currencies in the short term. Conversely, a rate hike remains a very distant goal in the eurozone and the United States. Technical point In the foreign exchange market, volatility has returned in the wake of the disappointing US employment report. Consequently, the euro reached a five-week high against the US dollar. On a weekly variation, the single currency shows a solid performance of +0.63%. Breaking the resistance located at 1.1850-60 opens the door for continued short-term upward movement. The next level to watch will be the resistance at 1.1988. In the medium term, our expectations remain unchanged. We think the euro has a strong probability of declining, towards 1.16. Regarding the EUR/GBP pair, few changes are expected in the short term. The sideways movement between 0.85 and 0.86 should persist. No market mover is visible that could allow the pair to exit the range. Finally, the surprise resignation of Japanese Prime Minister Yoshihide Suga just before the general elections scheduled for next November had almost no effect on JPY pairs. A few minutes after the announcement, the JPY temporarily strengthened against the dollar. No reaction against the euro. The EUR/JPY pair could continue its pattern initiated since August 19 with the target of the resistance level at 131.50. The supports and resistances shown below indicate the low and high points within which the rates are expected to evolve during the week.SUPPORTSWEEKLYRESISTANCESWEEKLYS2S1R1R2EUR/USD1.16501.17001.19881.2000EUR/GBP0.84670.85000.85990.8624EUR/CHF1.06441.06961.09101.0963EUR/CAD1.46711.47501.49991.5220EUR/JPY127.68128.63131.50132.24For personalized advice on exchange rate trends and hedging, contact our trading room: Announcements to follow This week, the focus will primarily be on the European Central Bank meeting, which will take place on Thursday. A change in monetary policy is not on the agenda. Discussions should mainly focus on the extent of the asset purchases carried out by the central bank under its crisis program called PEPP. Given that the recovery is well oriented in the euro area, the consensus of economists expects the monthly amount of asset purchases to be slightly reduced, from 80 billion euros per month currently to 60 billion euros. This corresponds to the average level observed in January and February 2021. Possible discussions among Governing Council members about the follow-up to the PEPP, which expires in March 2022, could take place. But it is not certain. As always, volatility is expected during the EUR pairs on Thursday afternoon's session. However, it is important to keep in mind that this is a low-stakes meeting. Below you will find the publications and events likely to have a major impact on currency rate developments.DAYTIMECOUNTRYINDICATORWHAT TO EXPECT?07/0911:00ZEW Economic Sentiment Index (September)The consensus expects a strong jump, to 56.7 from 40.4 in August.08/0916:00Central bank meetingDespite the bad surprise of Q2 GDP, the central bank should maintain its monetary policy unchanged.09/0913:45Central bank meetingUnchanged monetary policy. Likely upward revision of macroeconomic forecasts.10/0914:30Producer prices (August)Expected increase to 0.6% from 1.0% previously.Did you like this content? Share it!