Short-term Artistic Blur

In the foreign exchange market, unsurprisingly, volatility was present last week, as with stocks and bonds, due to the Trump administration. Since February 28, the euro has rebounded by 7% against the US dollar. This is significant. We are increasingly observing a distrust of institutional investors towards the US dollar. To be clear, they fear a unilateral devaluation of the greenback by the Trump administration. In this context, the euro temporarily plays the role of a safe haven. However, we believe that if these concerns persist, it will mainly be the Swiss franc that should be the big winner (despite the prohibitive customs taxes announced by Washington against Switzerland). The widespread risk aversion continues to penalize emerging currencies, especially in Asia. Among major currencies, the Canadian dollar is the least favored by investors and speculators. Short positions held have reached record levels. The reason is the fear that Canada, and consequently its currency, will be the most affected by Trump's trade war.

The macro point

The tariff policy of the White House continues to cause anxiety. Rightly so. But fortunately, there is good news on the economic front. For example, inflation continues to recede in the eurozone. It's a different story in the U.S., however, where a bad surprise is expected with this week's release of consumer prices. The short-term economic outlook remains complicated due to the muddled tariff policy of the White House and the customs taxes announced last Thursday. However, there are encouraging news: inflation in the eurozone continues to decrease, which gives the European Central Bank (ECB) plenty of room to ease its monetary policy and reach a neutral rate around 2%. Inflation in services dropped to 3.4% year-over-year in March. This was not a surprise. Leading indicators pointed in that direction. Harmonized inflation at the European level is also on a declining trend. Core inflation thus reached 2.41% in March. This is below the 2.5% target set by the ECB for the first quarter. Everything suggests that the decline should continue in the second quarter, with an inflation target of 2.2% for the period. Of course, there is always the inflationary risk linked to the resurgence of American protectionism. But this shouldn't derail the fundamental dynamics for now. On the rearmament front – an important theme for Europe, several countries have unveiled their goals for 2025 over the past week. Finland is negotiating to have defense spending reach 3% of GDP this year while Sweden aims for 3.5%. Germany is expected to reach the same level after discussions with all coalition partners. Poland remains in the lead with 4.7% this year. This is made possible by a healthy budgetary situation. Warsaw's ambition is to have the leading European army. Economically, even though it is always difficult to know the exact effect of these expenditures, it is likely that this should at least stimulate European growth, especially starting in 2026. For 2025, it's more complicated, particularly because it is difficult to assess how much U.S. customs taxes will penalize activity on the Old Continent. In the U.S., recent opinion surveys (also known as soft data) confirm the economic slowdown and decline in consumer confidence. However, it will be necessary to wait for the hard data for April and May to start having an idea of its magnitude. Nothing alarming, though. The American economy should show growth between 1% and 1.7% this year. The significant gap in estimates is once again due to the difficulty of measuring the economic effect of last Wednesday's announcements. The risk of recession is, according to us, dismissed. That's not too bad. Finally, unsurprisingly, the Reserve Bank of Australia (RBA) kept its key rate unchanged on April 1st. We still expect a rate cut of 25 basis points to occur next month. This is already priced into the Australian dollar. The currency is down 3.30% against the euro since the beginning of the year.

Technical point

The supports and resistances shown below respectively indicate the low and high points within which rates should move during the week.

	Weekly Supports		Weekly Resistances
	S2	S1	R1	R2
EUR/USD	1.0659	1.0701	1.1100	1.1150
EUR/GBP	0.8280	0.8290	0.8490	0.8510
EUR/CHF	0.9349	0.9388	0.9600	0.9622
EUR/CAD	1.5390	1.5400	1.5650	1.5700
EUR/JPY	157.12	158.98	162.20	163.00

Announcements to follow

This will be the moment of truth for the Federal Reserve (Fed) this week. The money market estimates that there will be three rate cuts by the central bank this year to support an economy sharply slowing down due to tariffs. But it's not that simple. Protectionism also raises inflation, even if it's hard to know in advance by how much. The US inflation in March, expected this week, will give us a first glimpse of the cost to pay resulting from Donald Trump's policy. In February, inflation decreased more than expected. Leading indicators, notably from the manufacturing sector, suggest that inflation will rebound. Thus, the price sub-index for the manufacturing sector jumped 7.5 points in one month. It's the fastest monthly pace since mid-2022. Additionally, there are inflationary pressures on housing – unrelated to protectionism – that are still present. The cost of housing has strongly contributed to inflation in recent months. Undoubtedly, this week's figure will be closely watched. It will help determine whether the Fed will have to focus more on controlling prices in the short term or if it has some room to stimulate the economy. We bet it will prioritize controlling inflation.

Below you will find publications and events that should have a major impact on the evolution of currency rates.

Day	Time	Country	Indicator	What to Expect?
10/04/2025	14:30	USA	Inflation (March)	Previous at 2.8% year-on-year.

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 purchase, and should not be considered as a basis or taken into account as an inducement to engage in any investment.