Something to Smile About 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 be used as a basis or considered as an encouragement to engage in any investment. The macro point It will certainly be much less worse than what economists announced at the end of last year. The economic trajectory in 2023 is not so bad. It is obviously only the beginning of the year (many things can derail activity). But it seems likely that the worst is not certain this time. The real surprise of 2023 is the impressive resilience of the eurozone. Two months ago, the economist consensus predicted a recession (often of minor magnitude) for most major European economies (including France). Last week, several international banks, including Goldman Sachs, revised their growth forecasts for 2023 upward. This is no small matter. It is very rare for a forecast adjustment to occur so quickly. For Goldman Sachs, the eurozone should finally manage to avoid a recession this year. The experts at the American bank anticipate growth of 0.6% instead of the previously forecast -0.1%. This significantly changes the situation. Growth is slowing down. It is inevitable. Strong support measures implemented in 2021 significantly sustained activity in 2022. But at some point, this positive effect diminishes.If we look at the latest statistics, everything indicates that a recession may not be certain in the eurozone. Germany was considered the weak link (due to its strong dependence on Russian energy for several decades). Ultimately, the industry across the Rhine is in rather good health. Industrial production should be stagnant in the fourth quarter judging by the November figure published in the middle of last week. This is a remarkable performance when energy prices have reached stratospheric levels that should logically have pushed the industry into a recession phase. Moreover, the Union's labor market is still dynamic with moderate wage pressure. The unemployment rate in the eurozone reached 6.5% in November. It is not full employment. But it is a good performance. Unsurprisingly, this hides disparities. The unemployment rate is highest in Spain (12.4%) and lowest in Germany (3%). This is largely related to the structuring of the labor market, which differs from one country to another. This is not going to change anytime soon.These reassuring data do not mean that the eurozone will not face significant challenges in 2023. Credit market tension is a problem. It is the first time in ten years that the yield on high yield (corporate bonds considered riskier) is at 4% at the start of the year. There will be companies that will experience difficulties in financing in the coming quarters. That is certain. This will likely lead to a greater number of corporate bankruptcies (a form of normalization after a significant decrease in bankruptcies during Covid). In addition, financial markets, including the foreign exchange market, will have to absorb approximately 700 billion euros of new liquidity this year resulting from the reduction of the balance sheet of the European Central Bank (ECB). This is not without risks. It corresponds to an additional tightening of financial conditions. Nevertheless, it is now evident that the dark scenarios revealed at the end of 2022 by many economists (severe recession, blackout, housing market collapse, etc.) will not materialize. At Mondial Change, we are betting on a year without extreme events at the eurozone level.On the other side of the Atlantic, economic indicators are also positive. Last week, good news came from inflation. The Consumer Price Index fell to 6.5% year-on-year compared to 7.1% in November and a peak of 9.1% in June. As we explained last week, this decline is mainly due to the collapse of energy prices (particularly oil prices). Excluding volatile products, inflation is also falling sharply at 5.7% year-on-year. This corresponds to a decrease of 0.4 points. As a side note, core inflation is now higher in the eurozone than in the United States. This is the first time since Covid.In the currency market, the European single currency was sharply up against all its counterparts last week (except the Japanese yen). The biggest increase was against the US dollar (+1.75%). Traders now anticipate that the European Central Bank (ECB) will likely be more hawkish than the American Federal Reserve (Fed) in the coming months. This should logically support the euro's exchange rate. The latest report from the CFTC in the United States (Commodity Futures Trading Commission - an independent federal agency responsible for regulating exchanges) confirms that institutional investors (such as banks) are still mostly positioned to buy the euro. From a technical analysis standpoint, crossing the 1.08 zone is also an important buy signal. The euro's rise could continue up to the 1.10 zone (this will nevertheless be a difficult level to exceed according to us).The supports and resistances displayed below respectively indicate the lows and highs within which prices should move during the week.SUPPORTSWEEKLYRESISTANCES WEEKLY S2S1R1R2EUR/USD1.05631.06921.08941.1000EUR/GBP0.87140.87890.89170.8971EUR/CHF0.97470.98971.01311.0236EUR/CAD1.41751.43401.46011.4650EUR/JPY134.80136.55141.39144.54This week is still about inflation, with the figure on producer prices in the United States in December. It is a statistic that went unnoticed two years ago. Times change. Since the foreign exchange market is focused on price dynamics, it's important to see what is happening on the production side (since it is generally passed on to the consumer later). It is likely that producer prices remain oriented downward (notably due to a lull in energy prices). If so, it is an additional argument for the Fed to refrain from raising rates too much next month.Below you will find the publications and events that should have a major impact on currency price evolution.DAYTIMECOUNTRYINDICATORWHAT TO EXPECT?16/0111:00ZEW Economic Sentiment Index (January)Consensus at -26.4 against -23.3 in December.18/0108:00Preliminary estimate of Consumer Price Index (December)Increase to 10.9% year-on-year (10.7% in November).14:30Producer Price Index (December)Expected slowdown to 0.2% month-on-month against 0.3% in November.19/0114:30Philadelphia Fed Manufacturing Index (January)Consensus at -9.5 against -13.8 in December.