It's bad 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 be used as a basis or considered as an inducement to engage in any investment. The macro point More and more analysts predict the start of a secular bearish cycle for the US dollar. Recent events (terrorist attacks in Israel and weak economic indicators) do not support this hypothesis. We believe the dollar will remain strong for a long time. In fact, attempts to rebound against the dollar by several currencies, such as the euro, in recent sessions have all failed. Geopolitical risk is making a comeback following the Hamas terrorist attacks on the civilian population in Israel. From the perspective of financial markets, as long as the situation remains confined to the current area (Middle East), this should have a direct impact on weak assets. We saw oil jump sharply on Monday, October 9, following the announcement of the massacres. But subsequently, the price of a barrel fell. However, if the United States decides to tighten sanctions against Iran, which is suspected of having given the green light to Hamas, the effect on the markets will be much more significant. The coming weeks will be crucial on this level.At this stage, what is certain is that the resurgence of geopolitical risk is an additional bad news as macroeconomics show clear signs of fatigue. Beyond macroeconomic indicators, which are poor in most developed countries, what stands out is the change in companies’ rhetoric. Before the summer, companies were cautiously optimistic about the future. This is no longer the case. They are preparing us for a world of low growth. In other words, a return to the pre-COVID period.A few months ago, the American economy showed impressive resilience. This is less the case now. Sectoral surveys point to a decline in service consumption due to the sharp rise in interest rates and persistent inflation. The producer price index in September surprised on the upside last week, at 2.2% year-on-year against 1.6% previously. If the services slow down this quarter, it is obviously a major problem because it is one of the main engines of the American economy (70% of economic activity). Meanwhile, residential investments continue to lag. Again, this is the direct effect of the increase in the cost of money. Several governors of the US Federal Reserve (both voting and non-voting members) have spoken in recent days to suggest that the level of rates is now appropriate in the United States. It seems that the monetary tightening cycle is likely on pause for a long time. It is obvious that the central bank does not want the American economy to enter a recession, especially with the approach of the 2024 US presidential election. According to us, barring a very bad surprise in terms of inflation, it is likely that the US key rate will not change until the end of the year.It is the same situation in the eurozone. During an interview with France Info on October 10, the governor of the Banque de France, François Villeroy de Galhau, clearly indicated that there will be no new rate hike in October in the eurozone. Villeroy de Galhau is close to Christine Lagarde. We can therefore assume that she also advocates for a pause in monetary policy. On the exchange market side, this could indicate that in the short term monetary policy will play a less important role in the evolution of currencies, particularly the EUR/USD.We have painted a rather bleak economic and geopolitical panorama. Fortunately, there is a small glimmer of hope. According to Bloomberg information, China could unveil a stimulus plan of more than $100 billion in the coming weeks. For now, no specific details have leaked and especially this information has not been confirmed by Beijing, obviously. So it's not time to rejoice. However, if a stimulus plan, even of smaller scope, is unveiled, it will undoubtedly be good news. We could have an expansionary fiscal policy in China and the United States to support demand from 2024. There is always a gap between the implementation of stimulus actions and their impact on the economy. The only downside is Europe. For now, the fiscal policy in the eurozone is restrictive. This is an aberration when real wage increases are negative (if we take into account inflation) and all economic studies clearly show that there is a demand problem to stimulate economic activity. Technical point Unsurprisingly, with a deteriorating economic environment and the return of geopolitical risk, even if it remains confined for now, it is an ideal market cocktail for the US dollar. The dollar index (which represents the evolution of the greenback against a basket of major currencies) is still trending upwards – around 106. We have observed here and there attempts to rebound against the dollar. This was the case for the EUR/USD but it quickly fizzled out. Contrary to some forex analysts who believe that the US dollar will soon start a new secular decline cycle, we think the dollar will remain strong in the short and medium term. The arguments for a prolonged dollar decline do not seem convincing to us at this stage (decline in US productivity, expansionary fiscal policy, de-dollarization). For now, what we observe is that traders are seeking to protect themselves against the risk of stagflation (or even for some against the risk of a recession), which mechanically benefits the greenback. The supports and resistances displayed below indicate the low and high points within which the courses should evolve during the week. Announcements to follow Aside from the geopolitical risk that will remain on everyone's mind, it will be necessary to monitor the inflation figures in Europe. The consumer price index (CPI) in the eurozone should not arouse much interest – it is the latest estimate that always aligns with the first one. On the other hand, if you are exposed to the British pound, it will certainly be interesting to know if the disinflationary process continues. The August CPI figure was surprising. The market awaits confirmation of the deceleration of inflationary pressures. This could cause some volatility for GBP pairs. However, we doubt that it will cause the EUR/GBP to exit its long-term range between 0.85 and 0.87. It is a stable pair. Below are the publications and events that should have a major impact on currency price developments.DayTimeCountryIndicatorWhat to expect?10/18/202308:00UKConsumer Price Index (September)First estimate for September. Previous at 6.7% year-on-year.10/18/202311:00EURProducer Price Index (September)This is the latest estimate for September, likely in line with the first (4.3% year-on-year)10/19/202314:30USAPhiladelphia Fed Manufacturing Index (October)Previous at -13.5.