Good News 2 The information presented in this publication is provided solely for informational purposes and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should in no way serve as a basis or be considered a motivation to engage in any investment. The macro point Encouraging inflation figures in the eurozone for March increase the possibility of a rate cut by the ECB as early as this week. However, we do not believe in this scenario. As usual, the institution is likely to exercise patience and wait for April's inflation figure before acting. In other words, we still expect a first rate cut in June. Finally, some good news! PMI activity statistics for the United States and China indicate a turnaround in the economic front. This is also the case for data on international trade in goods. The worst is behind us, a modest recovery is taking shape. It should be stimulated from the summer by the start of a cycle of rate cuts in major developed economies (United States, eurozone, Switzerland, Canada, and potentially the United Kingdom). In detail, last week’s statistics are good. Inflation continues to decline in the eurozone. The harmonized consumer price index excluding volatile elements fell for the first time in two years below the symbolic 3% threshold, to 2.95% in March year-on-year. This is below the forecast of European Central Bank (ECB) economists. It is therefore very encouraging. In most EU member countries, the disinflation process continues at a steady pace. During the period considered, inflation stood at 2.5% in France, 2.3% in Germany, and even 1.3% in Italy. This reactivates the scenario of a possible rate cut by the ECB as early as this week. However, we do not believe so. Christine Lagarde was clear about the need to wait and that a decision will be made in June. We see no reason why the ECB would rush now. Be cautious of comparisons made between eurozone and US inflation. The figures are misleading. On both sides of the Atlantic, the methodology for measuring inflation is different. In the United States, the consumer price index notably includes rental prices – which certainly better reflects price dynamics. Thus, if this valuable data is omitted, US inflation would be much lower than it actually is and at the level of the eurozone, probably around 1.9%. Methodology…it’s important! It allows us to understand what we’re talking about. In the United States, moreover, the labor market situation does not resemble a severe economic slowdown scenario. On the contrary, the latest employment figures show that after months of deceleration, wage growth remained stable in March (5.1% year-on-year) for those in jobs, and for those changing jobs, there is even reacceleration over the last two months (10% increase in March year-on-year). With such upward pressures on wages, it is evident that the Federal Reserve (Fed) is not in a hurry to cut rates. There are still fears that inflation could rebound. In China, the evolution of monetary policy is difficult to pinpoint. For months, the central bank (PBoC) seemed to accommodate a measured depreciation of the yuan. Logical. This theoretically allows a boost to exports, which are the traditional engine of the Chinese economy. However, it has been noted for about two weeks that the PBoC is asking local banks to buy yuan to limit depreciation. This is certainly not a change in exchange rate policy. But it is likely that the PBoC did not appreciate the extent of the yuan's depreciation since the beginning of the year, which is likely considered too rapid. Finally, in emerging countries, the rate cut process, often started since last year, continues. Last week, Chile cut its benchmark rate for the sixth consecutive time, by 75 basis points, to 6.50%. Unlike developed countries where there is sometimes a debate on monetary policy in the face of potential persistent inflationary tensions, this debate does not exist in emerging countries. Admirably, most of them have managed to quickly bring down inflation. This also explains why emerging countries (excluding China) are expected to show strong growth this year around 3.8% according to Bloomberg consensus, while developed economies, with the notable exception of the US economy, face anemic growth. Technical point You certainly remember that many analysts at the beginning of the year announced a lasting drop in the US dollar. For now, it has not materialized in the foreign exchange market. The dollar is irresistibly strong. The dollar index is even up 4% since the beginning of the year, with a notable increase against G10 currencies (the ten largest world economies). How can this be explained? Mainly the rate differential. The interest yield offered by the Fed helps attract foreign capital, which structurally supports the dollar. Yes, but the Fed will probably cut rates in June. What will happen? We think the dollar will remain strong and that the prospect of the November 5 presidential election and the return of ultra-protectionist policies will serve as a new catalyst for the rise – the dollar being, let's not forget, a safe haven in times of uncertainty.The supports and resistances shown below indicate, respectively, the low and high points within which the rates should evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.06111.06441.09991.1045EUR/GBP0.83500.84010.86440.8702EUR/CHF0.94330.95990.98990.9945EUR/CAD1.43231.44901.48011.4900EUR/JPY160.45162.11165.67166.12 Announcements to follow We strongly doubt that the central banks of Canada and the eurozone will act this week. They should practice patience and start the pivot only in June. In a way, we are witnessing a form of coordination of monetary policy between central banks.It will also be interesting to know if American inflation decreased in March. It had slightly increased in February, mainly due to the base effect. The absence of a significant drop would obviously complicate the Fed's task whereas, in parallel, a resumption of wage increases is observed.Below, you will find the publications and events that are expected to have a major impact on the evolution of exchange rates.DayTimeCountryIndicatorWhat to expect?10/04/202414:30USAConsumer Price Index (March)Previous at 3.2% in annual variation.10/04/202415:45CANCentral Bank MeetingKeeping the key rate at 5%.11/04/202414:15EURCentral Bank MeetingKeeping interest rates unchanged. Deposit rate at 4%.11/04/202414:30USAProducer Prices (March)Previous at 0.6% in monthly variation.