Not (yet) finished

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The macro point

Not (yet) finished The macro point A certain breeze of optimism prevails in most developed countries. However, the health horizon is darkening a bit. In Asia, the delta variant (which is 60% more contagious than the English variant according to British data) is leading to the implementation of new restrictions in several countries and the World Health Organization has issued an alert urging all vaccinated people to continue wearing protective masks. Even if hospital services are far from being saturated in rich countries, greater caution is necessary regarding the evolution of variants. In Europe, some countries are already taking new measures. Last week, Ireland made vaccination mandatory to enter indoor restaurants and bars, as is already the case in Austria, Denmark, Israel, and Moscow. Similar measures could be taken in France in the coming weeks depending on the health situation (for now, the delta variant accounts for only 20% of new Covid cases compared to 10% a week ago. Given its very rapid spread, it is likely to become the majority in the coming weeks in France).

What is striking is the contrast between concerns about the delta variant (mainly expressed by scientists and a minority of political leaders) and the high consumer confidence that has been noticeable on both sides of the Atlantic for the past two months. In recent days, several American and European statistics have confirmed a significant leap in consumer confidence in June. In the eurozone, the economic sentiment index is at a high point...of twenty-one years! In France, household morale is also very well oriented, reaching its highest level in 15 months and since the beginning of the Covid health restrictions in the country according to the INSEE estimate. The same trend is observed in the United States: the Conference Board's consumer confidence index is at a high point since the start of the health crisis, at 127.3 in June. Even the increase in inflation expectations (which is a real macroeconomic issue in the United States and complicates the task of the Federal Reserve) does not seem to have a real impact on household confidence. We have entered a period of high optimism that is likely to last throughout the summer. The continuation will depend on the states' ability to avoid stricter new restrictions if the delta variant spreads further and also on the evolution of unemployment.

On this subject, the latest US figures are, unsurprisingly, positive. June job creation reached 692,000 according to the ADP survey (a little less than in May and April but the trend remains good) and 850,000 according to the NFP report (which is above the consensus of 680,000). Most importantly, these job creations are occurring in all sectors (particularly those hard-hit by the pandemic such as service providers and leisure) and for businesses of all sizes. We are therefore still undoubtedly on a robust labor market. However, note that the distortions observed in the US job market, related to the pandemic, persist. Thus, record job offers fail to attract workers as quickly as expected. People are quitting more often, thinking they will find another job, but those who are unemployed are taking jobs less often than usual. In all likelihood, these distortions could persist for several more months.

Technical point

In the foreign exchange market, volatility among the G10 pairs (the ten major currencies traded worldwide) remains particularly low, and this is unlikely to change immediately as long as the statistics confirm the scenario of a strong global economic rebound and as long as there are no shocks at the political level. The dollar remains sought after by traders due to expectations of a possible tightening of the Federal Reserve's monetary policy. This explains why the euro collapsed last week to a three-month low, at 1.1820. Within a month, the EUR/USD pair lost nearly 2.8%, and everything indicates that the decline is not yet over. Technical analysis sets a short-term target for the pair at 1.1792. In the absence of risk aversion, the EUR/CHF pair is almost stagnant. A few days ago, the Swiss National Bank communicated about its interventions in the exchange market in the second quarter. Interventions fell to 296 million CHF - the lowest level in a year. We expect the pair to continue to move in its range from the past three months, between 1.09 and 1.11. The supports and resistances displayed below respectively indicate the low and high points within which the prices should evolve during the week.

	SUPPORTS	WEEKLY	RESISTANCES	WEEKLY
	S2	S1	R1	R2
EUR/USD	1.1664	1.1792	1.1991	1.2047
EUR/GBP	0.8405	0.8429	0.8626	0.8653
EUR/CHF	1.0838	1.0893	1.1002	1.1057
EUR/CAD	1.4320	1.4550	1.4784	1.4892
EUR/JPY	129.00	130.62	133.27	134.31

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Announcements to follow

This week should not hold many surprises on the macroeconomic front. We should essentially have confirmation of the major trends, some of which have already been outlined above. Among the figures to watch, there will be the German ZEW and the ISM manufacturing index (Tuesday), the JOLTS report for the United States (Wednesday), and finally, UK manufacturing output (Friday). The evolution of the delta variant and any new restriction measures that might be implemented should also be monitored a bit more closely than in previous weeks. Below you will find publications and events that should have a major impact on currency course movements.

DAY	TIME	INDICATOR	WHAT TO EXPECT?
07/06	11:00	ZEW Economic Sentiment Index (July)	A new increase expected by consensus to 86.0 compared to 79.8 previously.
	16:00	ISM Non-Manufacturing Index (June)	Still largely in expansion territory, at 63.3.
07/07	16:00	JOLTS Job Openings Report (May)	This is an off-cycle indicator but is increasingly commented on in this phase of reopening. The consensus is 8.300M against 9.286M previously.
07/09	08:00	Manufacturing Output (May)	Previous at -0.3% month-over-month.

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