Oops 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 incentive to engage in any investment. The macro point The release of U.S. inflation was a shock for the foreign exchange market. At the beginning of the year, traders were counting on at least four rate cuts by the Fed in 2024. They now anticipate only two, with the process starting in September. If confirmed, this should support the strong position of the dollar against other currencies, particularly against the euro. We can dissect the numbers in every way; it’s bad. U.S. inflation is too high and accelerating. The consumer price index reached 3.5% year-on-year in March compared to 3.2% in February and a consensus of 3.4%. Excluding volatile items, it's worse. We have reached 3.8% year-on-year and even 0.4% month-on-month (which is a lot). The culprit: inflation in services remains significant, particularly in insurance and transportation. It’s not necessarily structural. But it clearly highlights that it's still too early to consider a rate cut. Unless there are very disappointing employment figures in the short term—which is highly unlikely—a cut in U.S. interest rates in June becomes hard to justify. Moreover, the foreign exchange market does not believe in this scenario. A majority of operators now expect only two rate cuts this year, with a start in September. Last January, the consensus was for at least four rate cuts. More statistics are needed to refine these expectations. But what is certain at this stage is that a June cut, which was still the consensus three weeks ago, is no longer a credible possibility. We told you at the beginning of the year, the battle against inflation is not easily won, especially in an American context where households continue to consume and have significant wage increases (personal incomes surged at the beginning of the year and those changing jobs have on average a 10% salary increase!). This is not the case in the eurozone... Hence, the task of the European Central Bank (ECB) is somewhat easier. Outside developed countries, attention remains on China. For a long time, analysts hoped China would be a driver of global growth. It failed. Consumption is lagging. Let's not even talk about the real estate sector. Some analysts mention the possibility of direct support measures for households through cash payments (in economics, this is referred to as helicopter money). This was tested during COVID with little success in several major cities. Thailand is moving towards this type of measure following the adoption of a money distribution program amounting to 14 billion dollars, which will be financed both by the state budget (hence taxes) and public banks. What is certain, is that China will certainly closely watch if this mechanism works in the long term and stimulates the economy through consumption. At this point, we rather think that China will limit itself to targeted support measures aimed at the export sector. This is what it systematically does when the economy shows signs of slowing down. It's quite effective. However, it’s insufficient for China to regain its role as the engine of the global economy. Technical point In the foreign exchange market, the main trends are unchanged. Traders still favor the U.S. dollar. For the third consecutive week, long positions by institutional investors and speculators have increased on the dollar (CFTC's Commitment of Traders report). This is partly explained by the repricing of risk related to the U.S. presidential election (which favors the dollar as a safe haven) and the hypothesis that the U.S. Federal Reserve (Fed) will cut rates less quickly and to a lesser extent than expected due to persistent inflationary pressures. The market still does not believe in a resurgence of the Japanese yen even if the Bank of Japan has hinted at the possibility of a new rate hike during the year. Short positions on the yen are at a seventeen-year high. We don't see what could reverse the trend. A rate hike, even if it were to happen, would likely be small in scale, so it will not change the situation for the yen. At most, one can anticipate profit-taking at a certain stage that could temporarily give a bit of strength to the Japanese currency. We consider that the weak yen will persist throughout the year. Low volatility is the other point to keep in mind. The implied volatility on the EUR/USD pair is below 5%. It's abnormal. This is the case for all major pairs. The absence of major geopolitical risk (even if there are points of tension) and the relative stability of macroeconomic data certainly partly explain this lack of activity. Until when? Hard to say. It must be acknowledged that it is difficult to see what risk could arise in the short term on financial markets. More anecdotal but still important: the Israeli shekel continues to collapse due to fears of escalating tensions. Israel continues to be hit by Hamas rockets, despite the offensive in Gaza, Hezbollah attacks, almost daily terrorist attacks on its territory, and also faces the threat of an Iranian strike. That's a lot for such a small country. In such a context, no currency can withstand. The central bank refrained last week from cutting rates for fear of further weakening the shekel, even though a rate cut could benefit the economy. To watch. The supports and resistances shown below indicate the low and high points within which prices should move during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.06011.06551.09211.1011EUR/GBP0.83880.84110.86110.8690EUR/CHF0.95440.96900.99551.0133EUR/CAD1.45341.46011.48551.4901EUR/JPY162.45163.11165.11166.01 Announcements to follow No major statistics this week for the foreign exchange market. The Chinese GDP figure will be important to watch, but we know its reliability is low. On the margin, if corporate results in the U.S. are good – which is likely – it may slightly favor risk-taking. Inflation in the eurozone will be a non-event since it's the second estimate which never differs from the first. The door is still wide open for a rate cut in the eurozone in June. Below you will find the publications and events that should have a major impact on the evolution of exchange rates.DayTimeCountryIndicatorWhat to expect?04/16/202404:00CHIQ1 GDPPrevious at 5.2%.04/17/202411:00EURInflation (March)Second estimate thus low market impact.04/18/202414:30USAPhiladelphia Fed Manufacturing Index (April)Previous at 3.2.