Secret Ingredient

Every business leader knows. What makes the difference is productivity. This secret ingredient that allows for the creation of more wealth and its sharing. A study by the European Employers’ Institute, published during the holiday season, should give you cold sweats. It compares the evolution of productivity on both sides of the Atlantic. Unsurprisingly, the Americans fare better than us. But let's go into detail. The European gap began in the mid-1990s, marking the end of the post-war catch-up dynamic. Over the long trend (2000-2024), over 25 years, the average annual productivity growth is 1.0% in Europe, against 1.7% across the Atlantic. The gap has widened more sharply over the past five years. European productivity growth has fallen to 0.5% per year, while that of the United States has climbed to 1.9%. In 2024, the average hourly productivity in the EU is $72, compared to $116 in the United States (adjusted for purchasing power parity). That's a gap of 38%. It's huge. Unfortunately, with the unprecedented development of artificial intelligence in the United States, this is likely to accentuate significantly.

The macro point

This is the right time to review the major trends in the foreign exchange market. The EUR/USD remains in an upward trend and could reach 1.20 in the second quarter according to Bloomberg consensus. The trend is also favorable for the EUR/GBP due to the interest rate differential. No surprise for the yen, which remains decidedly lagging despite the recent rate hike by the Bank of Japan.

Attention, this does not mean that European companies will not be able to create wealth and face international competition. In all sectors, there are great success stories. However, at the European level, economic growth is likely to be stagnant. In the best case, excluding the Covid episode, the euro area can aim for growth around 1%, while it rises to around 2.5% in the United States. Adding to this is the demographic decline, which is a real problem in Europe, more so than on the other side of the Atlantic where immigration helps partly offset this phenomenon. All this creates a rather unfavorable cocktail in the coming years, unfortunately.

Technical point

In the foreign exchange market, it's a flat calm on major pairs. Liquidity is low. Nothing abnormal at this time. The major trends remain unchanged.

The EUR/USD is still following an upward trend, despite some pullbacks (breathing phases). Our target of 1.18 is attainable.

Furthermore, we are still positioned upward on the EUR/GBP, for example. Even though the market enjoys debating a possible new rate cut by the European Central Bank (ECB), this is unlikely. Refinancing conditions are particularly accommodating in the eurozone. As was the case before Covid, the number one economic problem remains weak domestic demand. A rate cut won’t change that. The ECB should therefore keep its key rate unchanged at 2% throughout next year. Conversely, the Bank of England (BoE) is far from finished with its rate-cutting cycle. We estimate that it should lower the money rate twice in the first half, bringing it to 3%. The rate dynamics should benefit the euro and push the EUR/GBP pair towards 0.89-0.90 in the coming months.

As we announced, no drastic trend change on the EUR/JPY despite the rate hike by the Bank of Japan (BoJ) in December. Contrary to what is often said, the weak yen is a boon for Japan. It boosts the income of Japanese exporting companies and is one of the factors explaining the attractiveness of the Japanese stock market for the past two years. Even if the BoJ should logically continue its rate hike process (+25 basis points according to us), we doubt it will be enough to support the yen. If the upward trend on the EUR/JPY continues as we foresee, the pair could test levels unseen for decades this year, like the 188-189 area. Important point, without intervention by Japanese authorities to counter the phenomenon.

The supports and resistances displayed below respectively indicate the low and high points within which prices should evolve during the week.

	Weekly Supports		Weekly Resistances
	S2	S1	R1	R2
EUR/USD	1.1599	1.1639	1.1810	1.2000
EUR/GBP	0.8600	0.8634	0.8800	0.8810
EUR/CHF	0.9133	0.9190	0.9318	0.9389
EUR/CAD	1.5891	1.5980	1.6200	1.6225
EUR/JPY	180.99	183.45	186.90	187.55

Announcements to follow

Unsprisingly, the economic agenda is almost empty at this time.

The only statistic to watch is the release of the manufacturing PMI indicator for December in Germany. It is expected in contraction territory (below 50). The German industry is struggling to recover from the energy crisis and the end of low-cost oil and gas supply from Russia. We expect the stimulus plan presented last February, amounting to 1000 billion euros, to begin bearing fruit on growth only from the second half of 2026. It will, in any case, certainly be sufficient to have growth close to 1.5% in 2026 (against 1% in France).

Below are the publications and events that should have a major impact on currency price developments.

Day	Time	Country	Indicator	What to expect?
02/01/2026	09:55	Germany	Manufacturing PMI (December)	Previous at 47.7.

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 in any case serve as a basis or be considered as an incitement to engage in any investment.