Pain for My France The information presented in this publication is provided for informational purposes only and does not constitute investment advice, a sales offer, or a solicitation to purchase, and should not in any case serve as a basis or be considered an inducement to engage in any investment. The macro point Politics is at the forefront, particularly due to French upheavals. Nevertheless, the major trends in the foreign exchange market remain unchanged. The euro is still favored by traders. The consensus expects the EUR/USD to continue rising towards 1.25 next year. It will first need to break through the 1.18-1.19 level, which acts as a major resistance. Political instability in France has no significant and lasting effect on the foreign exchange market. Last Monday, following the surprise resignation of Prime Minister Sébastien Lecornu, the euro/dollar hardly fell. This is normal. As long as there is no debt crisis and contagion to other Union countries, the euro will only marginally react to French political troubles. The market rightly considers what is happening in our country to be an isolated case. According to us, the problem for France is more economic than financial. Political uncertainty comes at the worst time. In the second quarter, French growth reached only +0.3%. The Bayrou government anticipated growth of +0.7% this year. This is optimistic. The consensus of economists expects +0.5%. It will certainly be lower given the negative impact on business and household confidence from recent events. In any case, it is a failure compared to last year when growth was +1.1%. And even then, there was no reason to be satisfied. All engines of French growth are stalled: domestic demand is almost nil, employment and investment prospects are down, wage increases are weak, and foreign trade is plummeting due to the resurgence of protectionism and the lack of competitiveness of many sectors of our economy. Add to this the rise in the euro which is seriously starting to penalize our exporting SMEs (those that opted for exchange rate hedging last year expected an EUR/USD pair at 1.15 for the highest target). Another dose of political instability obviously doesn't help. The rise in France’s borrowing cost is normal. And it will continue without reaching crisis levels. The European Central Bank (ECB) is keeping a close watch and will intervene to prevent this. However, it will penalize economic activity. Less wealth created, more taxes to maintain our standard of living. Half of the rise in public debt since 2017 is related to pensions – and not, as is mistakenly believed, to support measures related to the health crisis. Sooner or later, this politically delicate issue will need to be addressed. France is, unfortunately, among the most troubled countries. But let’s be objective, all of Europe is lagging. Germany is expected to experience its fourth year of economic stagnation despite the massive stimulus plan announced earlier this year. Belgium is in a situation quite similar to France, notably due to difficult-to-contain debt. Certainly, Spain is doing well with growth that could reach +2.8% in 2025 and industrial production at +3.4% year-on-year according to figures published last week. It’s appealing. But to achieve this, it was painful. Budgetary leeway had to be regained, and austerity and real wage cuts were experienced for several years starting from 2010-2012. No one is ready for this in France. More worryingly, large European companies no longer play in the big leagues. In 1980, Europe had 4 companies in the top 25 of the largest market capitalizations globally, compared to 21 for the United States. In 2025, Europe has none, while the United States has 22. Europe completely missed the new technology wave that began in 2010. Under these conditions, it’s hard to believe in a European economic renaissance. That was the theme early this year on financial markets when everyone was panicking about Donald Trump and hoping for a quick resolution to the war in Ukraine. It seems to be more wishful thinking than reality for the moment. Technical point This is not necessarily a problem for the single currency since it's known that growth dynamics are far from being a determining factor in the evolution of exchange rates. For several weeks, EUR/USD has started a consolidation phase in a calm market marked by very few statistics (only German industrial production was published last week, without market impact obviously). As long as the pair remains above 1.15, the upward trend is intact. The consensus predicts that EUR/USD could reach 1.25 next year. This seems credible to us. Last week was especially marked by the surge of EUR/JPY. The pair reached a new record high at 177.90 – representing a 10% rise in six months. We see little that could stop the upward movement (unless the Bank of Japan raises rates, which does not seem imminent). It is not impossible that the pair will reach the 180.00 threshold by the end of the year. The support and resistance levels below indicate respectively the low and high points within which prices should evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.15501.15001.17321.1809EUR/GBP0.85770.85890.87100.8790EUR/CHF0.92390.92700.93900.9421EUR/CAD1.61401.61901.63021.6333EUR/JPY174.89175.90178.10179.22 Announcements to follow This week is going to be quite calm on the economic front. According to foreign exchange market expectations, the probability that the American Federal Reserve (Fed) will cut its key rate by -25 basis points in October is close to 96%. It is therefore certain. Any statistics to be released before the next FOMC meeting will not change the course. However, caution is needed regarding November figures as the outcome of the December FOMC meeting is far from clear. Some within the Fed's decision-making body believe that the rate reduction needs to go faster (like Stephen Miran, appointed by President Donald Trump). Others point rather to inflation risks that could materialize this quarter, resulting from duty taxes, and call for patience. Caution is therefore advised. Below you will find the publications and events that should have a major impact on currency trends.DayTimeCountryIndicatorWhat to expect?October 15, 202514:30USAInflation (September)Previous at 2.9% year-on-year.October 16, 202514:30USAPhiladelphia Fed Manufacturing Index (October)Previous at 23.2.October 16, 202514:30USAProducer Prices (September)Previous at -0.1% month-over-month.