Poor France The information presented in this publication is communicated to you for informational purposes only 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 an incentive to engage in any investment. The macro point In the long term, we are convinced that the dollar will remain strong, particularly against the euro. This is due to the economic and stock market outperformance of the American economy, a high level of productivity (3% this year according to us), and the scarcity of dollar assets, which structurally makes the greenback bullish. Volatility remained contained in the foreign exchange market last week. The only notable point: hedge funds significantly increased their long positions on the Japanese yen. The uncertainty regarding the possibility of a new rate hike by the Bank of Japan in the fourth quarter does not seem to have had a lasting influence on investor positioning. There is also a certain wait-and-see attitude on USD pairs, which is logical just before the November election. Historically, the greenback drops by 5% in the five sessions following the election. Many funds take long positions on the dollar just before the election and take their profits shortly thereafter. This year, the Federal Reserve (Fed) meeting on November 6 and 7 should also be taken into account. It could hold surprises. In September, the Fed lowered its key rate by 50 basis points. If we look at the evolution of two-year US Treasury bonds, which are not administered by the Fed and which reflect money market expectations, a further similar magnitude cut is expected in November. It's not a foregone conclusion. But if it were to happen, it would be an additional short-term bearish factor for the US dollar. In the long term, we remain bullish on the dollar due to the economic and stock market outperformance of the American economy, the resurgence of productivity (probably 3% this year while it is negative in the eurozone), and the scarcity of dollar assets, which structurally makes the greenback bullish. The real news last week was the French budget proposal for 2025, which must be submitted to the European Commission by the end of the month. In theory, this has no direct impact on the foreign exchange market. But if France enters an uncontrollable debt spiral and painful fiscal consolidation, it could be a negative factor for the euro. We have two pieces of bad news. The first is that public spending will increase by 2.1% again, contrary to what was previously stated. This means that much of the fiscal effort will rest on rising taxes, which can only constrain growth. The second is that we are likely engaged in a deficit reduction strategy that will stretch over four to five years, or even more if the estimated 60 billion euros in savings by 2025 are not ultimately achieved, which is likely. The consequence of this is that we are facing a complete economic inversion within the eurozone. Germany and France are now the lame ducks, while Southern Europe—the so-called club Med—are the examples to follow. In 2023, Portugal managed to generate a budget surplus and plans to cut corporate tax to 15% in 2027, for example. In the immediate future, there is no reason to panic. We are not facing a debt crisis scenario like in 2012. However, French difficulties reinforce Europe's lack of attractiveness. Instead of European surpluses being recycled on the Old Continent, they go to the United States, which supports the American currency to the detriment of the euro. This is a fundamental movement that explains why the dollar remains so strong (it is overvalued by 9% against major currencies according to our calculations). What is certain is that the next few years will be challenging for France, its businesses, and its taxpayers. Technical point On the foreign exchange market, the EUR/USD pair is rather downward-oriented with the possibility of testing the support zone at 1.08 in the medium term, if the current trend continues. Several factors favor a depreciation of the single currency: the increase in yields on the American side and especially the rise in energy prices due to geopolitical tensions in the Middle East. The situation there should be closely monitored. A more significant rise in oil would translate into a renewed risk aversion in financial markets, which is usually not favorable for the euro. As for the other major pairs we monitor, it's calm with existing trends holding steady. The supports and resistances displayed below respectively indicate the lows and highs within which rates should evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.08331.08901.11001.1111EUR/GBP0.82900.83100.83980.8421EUR/CHF0.92890.93110.94110.9500EUR/CAD1.47991.48901.51091.5167EUR/JPY159.11159.99162.53163.10 Announcements to follow In an ideal world, the European Central Bank (ECB) should lower its key rate by 50 basis points. The European economy desperately needs a quick boost, particularly the manufacturing sector which is collapsing. Unfortunately, that's not going to happen. The ECB remains focused on a potential price-wage spiral that does not exist, prompting it to only lower its key rate by 25 basis points. It's not enough. It's already priced in. Mainly, it won't allow sectors heavily dependent on interest rate levels to catch a breath of fresh air. Everything suggests, in this context, that we won't escape economic stagnation anytime soon. Below are the publications and events that should have a major impact on currency rate developments.DayTimeCountryIndicatorWhat to expect?15/10/202409:45FRAConsumer Price Index (September)Previous at 0.5% month-on-month.17/10/202414:15EURCentral bank meetingRate cut of 25 basis points.17/10/202414:30USARetail Sales (September)Previous at 0.1% month-on-month.