Spanish Surprise and French Disappointment The information presented in this publication is provided for informational purposes only and does not constitute investment advice, a sales offer, or a solicitation to purchase, and should not be used as a basis or considered as an incentive to engage in any investment. The macro point The playing field is being set for the fall: the ECB and the Fed will reduce their key interest rates in September, while the BoE still has clear room to do so on August 1st. Finally, there are many rumors in the money market about a possible intervention by the Bank of Japan to rescue the yen... This is not credible, in our opinion. We are gradually entering the summer period where statistics are fewer. Good news: the IMF published its latest macroeconomic projections last week, which establish a framework for the coming months. It’s not so bad. The United States will continue to outperform the rest of the world with expected growth of 2.6%. Canada will be the main economy benefiting from American dynamism with an estimated GDP increase of 1.3%. In Europe, the situation is a bit more bleak, unsurprisingly. Growth is expected to be clearly below the symbolic threshold of 1%: 0.2% in Germany, 0.7% in Italy, 0.7% in the United Kingdom, and 0.9% in France. The forecast for France could however be significantly revised downwards in the coming weeks due to the significant budgetary efforts needed to reduce the deficit, which will inevitably weigh on growth. Some in Germany even wish to impose a debt limit on France. This underscores how much the debt level is beginning to worry. At Mondial Change, we are counting on 0.7% growth this year. This seems more realistic to us. There is, however, an exception in Europe. It’s Spain. The Spanish economy is benefiting from the improvement in the real estate sector and the positive effect of tourism, which could allow it to achieve growth of 2.4% this year. It’s almost the American performance! Among the fragility factors in Europe, there is the industry. Industrial production in the eurozone has collapsed by 3% since January 2021. The underperformers are Germany and Italy with declines of 5% and 7% respectively. Conversely, in France, it can be considered to hold up relatively well with a decrease of only 1% over the period. This is explained by the French industrial sector's lower sensitivity to China and by the few support measures taken by the government. These have notably had positive effects on job creation in the industry. Across the Atlantic, the economy is still in good shape. Even though it's still too early to know what will happen in the November presidential election, the probability of a Trump election is strengthening following the assassination attempt. For comparison, after the assassination attempt on Reagan in 1984, the Republican easily won the presidential election. He secured 525 electoral votes against only 13 for his Democratic opponent. History doesn’t repeat... but one cannot deny that there’s a Trump advantage at the moment. Besides, this is what the market thinks. 'Trump trades' have strengthened considerably in recent sessions: long (buyer) dollar, short (seller) bonds, short peso and short China. Many things can happen in four months, so caution is needed. Finally, a word about Israel, even if it's less in the media spotlight. The situation there remains complicated. Since October 7th – the date of the Hamas terrorist attacks – about 46,000 businesses have closed, and this number could rise to 60,000 by the end of the year according to the left-wing newspaper Maariv. Paradoxically, the currency holds. The Israeli shekel has strengthened by 2.2% against the euro over the past three months. This can be explained by the Bank of Israel's decision to prioritize exchange rate stability over economic recovery. It refused to lower key interest rates even though the economy is in recession. It's an unexpected choice. It seems to consider that a reduction in borrowing costs will only have a marginal effect on economic dynamics when it is hindered by the war with Hamas. Technical point On the forex market, there are no major trend changes. Traders have been mentioning possible interventions by the Bank of Japan (BoJ) to save the yen for several sessions. We are skeptical. Even if it were true, as long as the central bank does not significantly raise its rates, a weak yen will remain the norm. At most, we can hope for a slight strengthening against the dollar when the US Federal Reserve (Fed) lowers its rates (probability of 95%). But this will be very short-term. Finally, note that the European Central Bank (ECB) is preparing the ground for a new rate cut of 25 basis points in September. On the side of the Bank of England (BoE), we still think a rate cut on August 1st is possible. The supports and resistances displayed below indicate the weekly low and high points within which prices should evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.06991.08011.10501.1109EUR/GBP0.83330.83810.85000.8549EUR/CHF0.95110.95330.97120.9801EUR/CAD1.47331.48091.50091.5123EUR/JPY167.90168.11172.33173.56 Announcements to follow This week, there is only one uncertainty. It's the Bank of Canada (BoC). Economists are divided on the opportunity for another rate cut of 25 basis points while inflation shows clear signs of recovery. From our point of view, the BoC can afford to wait before easing monetary policy again. We therefore think that the July 24th meeting will have little effect on the Canadian dollar exchange rate. The core PCE index for the US economy is the most important statistic of the week. However, it should not divert US monetary policy. Inflation continues to decline with the maintenance of inflation in services not being problematic. The rate cut is still in sight. Below you will find the publications and events that should have a major impact on currency rate developments.DayTimeCountryIndicatorWhat to expect?07/24/202415:45CANCentral Bank MeetingDebate among economists on the opportunity for another rate cut.07/25/202410:00EURIFO Business Climate Index (July)Previous at 88.6.07/26/202414:30USACore PCE Index (June)Previous at 2.6% year-on-year.