Money Flowing Freely The information presented in this publication is provided purely 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 as an incentive to engage in any investment. The macro point Let's start the week with some good news. Liquidity is flowing abundantly thanks to global central banks massively reducing interest rates. This will invigorate economies, especially from 2026 onwards. Let's begin with very good news. Liquidity is abundant. Over the last twelve months, global central banks have lowered their rates 168 times. That's significant. It's the third largest easing cycle after the financial crisis of 2009 and the Covid crisis. The rate-cutting process is likely over in most economies. An exception is the United States, where rates could fall another 150-200 basis points. All this is very good news as it will fuel the credit cycle (sometimes with excesses) and invigorate the economy – potentially avoiding a recession scenario. Based on the latest American statistics, the Federal Reserve (Fed) is probably lowering its rates a little too late, at a time when the economy shows signs of acceleration that should be confirmed next year. When adding the budgetary support measures decided by the Trump administration, there's a high risk that American inflation will strengthen in 2026 – although without reaching problematic levels. This is a data point that has so far been overlooked by the market. It's important because it could hasten the end of the rate-cutting cycle across the Atlantic. What impact on the dollar? As has been observed in recent weeks, the rate differential between the United States and the rest of the world can marginally support the greenback. But it's not enough. Certainly, the whole protectionism rhetoric needs to dissipate for investors to regain confidence in the dollar. An important point: distrust of the dollar doesn’t mean dedollarization. It's an old fallacy in the foreign exchange market. The latest figures contradict the dedollarization thesis. According to the Bank for International Settlements, the share of the greenback in foreign exchange reserves remained at 57.74% in the first quarter of 2025, compared to 57.79% in the fourth quarter of 2024. No negative Trump effect on the currency. The euro's share is stable at 20.06%. The share of the Chinese renminbi fell to 2.12%, from 2.18% previously – showing the difficulties in internationalizing the yuan. Finally, other currencies, like the British pound and the Japanese yen, represent 20.10% of total reserves. The reality is that the king dollar remains, for lack of a credible alternative. However, a rise in diversification is observed, sometimes benefiting emerging market currencies. In Europe, the economic situation remains stable with growth mainly driven by the southern countries (the former struggling countries). According to the latest estimates, Spanish growth should be around 2.8% this year – compared with French growth estimated between 0.5% and 0.7%. How to explain the Spanish success? Austerity that has restored budgetary leeway (obviously, it's socially painful), a rebound in tourism since Covid that has particularly benefited the Iberian Peninsula, and finally European funds that invigorate the Spanish economy and allow it to position itself in fast-growing segments, like infrastructure hubs and AI through data centers. Difficult to apply the Spanish model to France... Lastly, to watch, China announced last week that it will hold the Plenum of the Chinese Communist Party Congress from October 20 to 23. It will be an opportunity to define the major economic orientations for the years to come at a time when the Chinese economy shows timid signs of recovery. Technical point The foreign exchange market continues its expansion—confirming it's an essential market. According to the latest data from the Bank for International Settlements, average daily volumes have jumped from $7,500 billion to $9,600 billion in three years. There's a Trump effect as we've seen an acceleration since 'Liberation Day.' However, it would be misleading to blame everything on the occupant of the White House. In terms of dynamics, the EUR/USD is still in an upward channel with a target of 1.20 which could be reached by the end of the year. The pair would need to fall below support at 1.1580 for a change in direction. We are far from that. The upward trend is also intact for EUR/GBP and EUR/JPY. The supports and resistances displayed below respectively indicate the lows and highs within which the rates are expected to evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.16591.17001.19091.2000EUR/GBP0.85890.86120.87700.8823EUR/CHF0.92330.92780.94100.9421EUR/CAD1.61801.62221.64001.6422EUR/JPY169.99170.90175.00176.22 Announcements to follow This week is particularly calm on the economic front. In Asia, it will be marked by the traditional holiday period in China lasting until October 8. This means liquidity on the yuan is low. On the American side, few statistics. The University of Michigan's U.S. Consumer Confidence Index is worth watching. However, beware, since Covid, it is no longer a reliable leading indicator of the U.S. economy. The cause is a low response rate. Below are the publications and events expected to have a major impact on currency rates.DayTimeCountryIndicatorWhat to expect?06-08/10/2025XChinaPublic HolidaysLow liquidity on the Chinese yuan.10/10/202511:00USAUniversity of Michigan Consumer Confidence Index (October)Previous at 55.1 in September.