Strong Wind Advisory 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 be used as a basis or considered as an inducement to engage in any investment. The macro point Strong Wind WarningMacro PointThe European Central Bank made no announcement at its meeting last Thursday. It was forced to acknowledge that inflation continues to rise. On the same day, inflation in Spain reached its highest level since the country joined the euro, at 5.5% on a year in October against Bloomberg economists' forecast of 4.6%. The increase in energy prices is the main factor pushing inflation to new records. But the European Central Bank wanted to remind that inflationary pressures are temporary in its view. They should start to ease next year. It is uncertain whether the market believed it. Based on futures contracts, traders anticipate a twenty-basis-point increase in the central bank's main policy rate in December 2022 to counter high inflation. The rate hike schedule is accelerating. The EUR/USD did not fail to react. Volatility was high during the Thursday afternoon session. The euro increased by nearly 100 pips in a few hours, temporarily anchoring a few pips from 1.17.In the United States, inflation is also a major concern. There is a high probability that the Democratic administration of President Joe Biden will announce this winter (either by the end of the year or at the beginning of next year) new support measures for American households to mitigate the price increase. Over a year, food prices have increased by about 5%, gasoline by more than 30%, and rents by more than 10%. The negative impact is immediate for the most modest households. These new checks sent to Americans should be approved by Congress before the 2022 midterm elections. It would be good news that would help support economic activity in the United States. In the third quarter, the American economy showed signs of faltering. GDP increased by only 2% over a year. It is lower than what many banks and financial institutions expected (3.8% for Jefferies, for example). Several factors have hindered growth: the resurgence of the pandemic in some states and natural disasters, such as Hurricane Ida, which hit the East Coast hard at the end of August-early September.In the rest of the world, rate hikes are current events. Brazil increased its policy rate by 150 basis points – unprecedented in twenty years. The goal is to show the determination of the central bank to fight inflation. Canada has also opened the door to a faster-than-expected increase in the cost of money, probably in the first part of 2022. Technical point On the foreign exchange market, the rebound of the euro against the US dollar was short-lived. It was a technical rebound in our opinion. The EUR/USD pair shows a decrease of 0.50% over the past week. Last Friday's fall below the support zone of 1.1610 opens the door to a more significant depreciation of the single currency. We are targeting a rally of the support located at 1.1433 in the medium term. It will not be immediate. There may be new technical rebounds. But the underlying trend is clear. The decline prevails. The supports and resistances displayed below respectively indicate the low and high points within which prices should move during the week.SUPPORTSWEEKLYRESISTANCESWEEKLYS2S1R1R2EUR/USD1.14331.15311.17101.1825EUR/GBP0.83250.83960.84870.8515EUR/CHF1.04831.05101.07361.0805EUR/CAD1.42011.42141.44341.4465EUR/JPY129.39130.96134.08134.55For personalized advice on currency trends and hedging, contact our trading room: Announcements to follow All the ingredients are in place for a strong surge in volatility on the currency market this week. The outcome of the US Federal Reserve (Wednesday) and Bank of England (Thursday) meetings is far from certain. In the United States, the consumer price index is above the 5% threshold. It is a sufficient reason for the central bank to announce the start of the monetary normalization process, in our view. Asset purchases made under quantitative easing (also abbreviated QE) should slow down from mid-November or early December. The Chairman of the Federal Reserve, Jerome Powell, could also mention the possibility of a key rate hike sooner than initially anticipated by the market. We must expect a significant increase in volatility on USD pairs Wednesday evening between 8 p.m., Paris time, and at least 10 p.m. The Bank of England faces a situation quite similar to that prevailing in the United States. The consumer price index across the Channel is expected to reach 4% by the end of the year and climb to at least 5% at the start of next year, according to forecasts. In recent weeks, the English central bank has clearly opened the door to a key rate hike, potentially as early as the November 4 meeting. It is not certain, however. It will be necessary to plan an appropriate currency hedging strategy to protect against the increase in volatility that could occur on GBP pairs this week. Finally, US employment will be the last market mover of the week. The ADP survey published on Wednesday should attract little attention. It is not a reliable indicator to predict the evolution of the official US employment report scheduled for Friday. The consensus predicts a stable unemployment rate at 4.8% of the population in October. Job creations are expected to rise significantly to 385k over the same period, after a disappointing September (194k). The dynamics of the labor market in the US remain overall good despite persistent Covid concerns and massive early retirements that have weakened some sectors. You will find below the publications and events that are expected to have a major impact on the currency price evolution.DAYTIMECOUNTRYINDICATORWHAT TO EXPECT?01/1117:00ISM Manufacturing PMI (October)Slight decline to 60.4 against 61.1 previously.02/1110:55Manufacturing PMI (October)Increase to 58.5 against 58.2 previously.03/1114:15ADP Non-Farm Employment Change (October)The consensus anticipates a sharp slowdown to 369k against 568k in September.17:00ISM Non-Manufacturing PMI (October)Nearly stable at 61.5 against 61.9 previously.20:00US Federal Reserve meetingThis is the most important event of this semester. The US central bank should announce a slowdown in asset purchases, also called tapering;21:30Jerome Powell press conferencePowell will reveal his diagnosis about the US economy and comment on the day's central bank decision. Expect a lot of volatility.04/1114:00Bank of England meetingThe market is abuzz with rumors about a possible key rate increase at this meeting. Expect a lot of volatility on GBP pairs.05/1114:30Official US employment report (October)Job creations are expected to rise sharply to 385k against only 194k in September (this figure is subject to revision).Did you enjoy this content? Share it!