Sluggishness The information presented in this publication is communicated for informational purposes only and does not constitute investment advice, a sales offer, 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 In a world where growth is slowing and the US economy is outperforming, it is risky to be positioned for selling the US dollar. This is the first lesson to be learned at the start of the year. The second is that Japan may finally be comfortable with a weak yen, which helps stimulate exports in a context where international trade is sluggish. There may not be a normalization of monetary policy after all. A slight dip in global growth. Japan is in recession. The same is true for the United Kingdom. China is experiencing structural deceleration. The German miracle is no more. In France, sluggish growth persists. The European Commission revised its forecast for 2024 to only 0.9% (versus 1.4% predicted by the government). Should we be worried? Not necessarily. Growth in developed countries is returning to pre-crisis levels. In the eurozone, this means GDP might increase by only 0.6-0.8% this year (economists' forecasting range). However, there is a positive surprise. The US economy is doing better than expected. Bloomberg's economist consensus forecasts growth of 1.2% in 2024. And this is just the beginning. It could be slightly higher if favorable statistics regarding consumption, employment, and both private and public investment persist. We would not be surprised if the US GDP manages to grow by 1.5% this year. Last week, we also confirmed that the disinflation process continues in the United States. Sure, it’s slower than anticipated. Analysts hoped that the consumer price index would come out at 2.9% year-on-year in January. It was finally at 3.1%. The forex market's reaction was initially negative. In our view, one should avoid overinterpreting this statistic. The January figure is always very volatile. Moreover, it is better to look at the trend in core inflation (excluding energy and food prices) to better understand the inflationary forces at play. Good news, core inflation fell last month to a low point since May 2021. It's significant. It's especially very encouraging. The period of very high inflation was a shorter parenthesis than anticipated. In Switzerland, inflation in January also fell, more significantly than expected. Core inflation dropped by 0.4% over one month, and imported product inflation plummeted by 1.3% over the month and 0.9% year-on-year. This is essentially the effect of the strong Swiss franc. A strong currency reduces imported inflation, and vice versa. The strong franc monetary policy has managed to bring inflation back on track. It wasn't easy, knowing that part of the prices are administered in Switzerland (25% of the consumer price index's weight) and they increased significantly by 1.3% over one month in January. In Japan, the sharp decline of the yen against all major currencies causes a colossal downgrading of the country. The archipelago has just conceded its place as the third largest economy in the world to Germany. It's a bit of an electroshock. However, it should not have any influence on the direction of the Bank of Japan (BoJ)'s monetary policy. The consensus among economists predicts a normalization of rates next April. We are skeptical. This has been discussed in the markets for more than a year, but it never materializes. We are beginning to wonder if the BoJ is not instead satisfied with the current monetary policy, which allows it to exit deflation and, by lowering the yen's exchange rate, gives Japanese companies an undeniable competitive advantage in global markets. A final word on Africa: the project of a common currency has resurfaced once again. Last week, Niger, controlled by a junta since 2023, proposed this project to Burkina Faso and Mali, presenting it as a 'step out of colonization.' This common currency should, in theory, replace the CFA franc. It is unlikely to come to fruition. It's a perpetual mirage in Africa. Mali does not seem willing to follow through. In the past, it has already abandoned the CFA franc. It did not turn out well. Technical point On the foreign exchange market, last week's event was the six-month high reached by the British pound against the euro following the release of positive UK labor market statistics, which delay the urgency of a rate cut. The technical British recession should not be a determining factor for the monetary easing schedule. It is of very low magnitude. Above all, the latest statistics on manufacturing activity and consumer confidence suggest a strengthening of growth at the start of the year. The euro-dollar made some rebound attempts on Wednesday and Thursday but without much success. The underlying trend remains bearish. Europe's poor economic dynamics are a major obstacle to a lasting euro rebound. The growth differential between the two sides of the Atlantic should weigh more than the possible rate differential this year. To be very direct, given the performance of the US economy, it is very difficult to be positioned as a seller on the US dollar. Below are the support and resistance levels indicating the low and high points within which prices should move during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.06011.06231.08881.1011EUR/GBP0.84000.84220.86150.8666EUR/CHF0.92220.93020.95090.9655EUR/CAD1.43251.44111.46121.4788EUR/JPY158.11159.09162.99163.50 Announcements to follow It is a particularly calm week on the statistics front with the inflation figures for the US economy. Unsurprisingly, disinflation should continue. We doubt this data will have a real influence on exchange rates and monetary policy. The main concern for the Federal Reserve (Fed) is to ensure that inflation declines over the long term. So far, this is the case. In the background, the US electoral process will be monitored. Questions are increasingly being asked about the mental health of President Joe Biden, aged 81. We doubt he will be pushed to withdraw from the presidential race by the Democratic party. But that's a possibility that cannot be totally excluded… In any case, the subject deserves special attention. Below are the publications and events that should have a major impact on currency movements.DayTimeCountryIndicatorWhat to expect?22/02/202411:00EURConsumer Price Index (January)This is the second estimate…which never differs from the first, so negligible market impact.23/02/202408:00GERGDP for Q4 2023Previous at -0.3% in quarterly variation.23/02/202410:00GERIFO Business Climate Index in Germany (February)Previous at 85.2.