The Trump Era The information presented in this publication is provided purely for informational purposes and does not constitute investment advice, a sales offer, or a purchase solicitation, and should in no case serve as a basis or be considered as an incentive to engage in any investment. The macro point The interest rate gap between the two sides of the Atlantic and the possibility of a Trump victory, which would lead to a rise in inflation, have caused an increase in yields on U.S. bonds, which has supported the dollar in recent weeks and, in turn, contributed to weakening the euro. Last week, the EUR/USD pair collapsed below 1.08. This is certainly just the beginning. Last week was particularly quiet in terms of statistics. Financial markets are now betting on a Donald Trump victory and the implementation of inflationary economic policies (reduction of immigration and tariffs), hence the rise in gold, the US dollar, Bitcoin, and US bond yields. Trump's campaign is gaining real momentum. Polls are tighter than ever, which generally tends to give him an advantage, as he has been underestimated in the past. The vice-presidential debate was an excellent performance for JD Vance, dispelling some concerns about this choice. There was Musk, of course. Trump's performance at Macdonald is also working very well in terms of image. His campaign is responsive, fast, and relies on humor, which helps humanize him. In contrast, Kamala Harris's campaign, although perfectly structured and having raised much more funding, struggles to generate enthusiasm. Harris refuses to get involved; she declines most interviews. Furthermore, she is perceived as lacking convictions (as evidenced by her often ambiguous stance on the Middle East situation). Obviously, nothing is decided. The campaign can still hold many surprises, as in 2016. What is certain is that the market, after reducing its exposure to the US dollar in September due to falling US rates, has been positioning itself to buy the greenback since the beginning of the month. This is also accentuated by the geopolitical context that slightly favors safe-haven values. Based on the historical evolution of the dollar, the currency tends to appreciate before each presidential election and then plummet heavily during the sessions following the vote. Hedge funds often liquidate their positions at that time. In Europe, the macroeconomic situation continues to deteriorate, unsurprisingly. The German recession could last a large part of 2025. Given the budget debate in France, which focuses mainly on increasing taxes, it is likely that French growth will fall sharply next year... which will reduce tax revenues. Only Southern Europe is doing well. Spanish growth, partly aided by the tourist season and improved manufacturing sector competitiveness, is booming. Portugal continues its policy of tax reduction, with a new measure aimed at exempting young people from taxes. Finally, Greece, once the sick man of Europe, shows a budget surplus and one of the biggest increases in industrial production. There you go, anything is possible. Unfortunately, the good health of the south will not be able to offset the troubles of Germany and France. This should materialize in a structurally weak euro on the foreign exchange market. In purchasing power parity, we estimate that the fair value for the EUR/USD is between 1.05 and 1.03 (note, this is not a price target). Finally, a word on China. Official media increasingly mention the prospect of a mini fiscal stimulus plan after the US presidential election. For now, Beijing has only implemented monetary measures. However, we doubt that this will be enough to restore the confidence of Chinese households, who see the value of their wealth, 60% exposed to real estate, fall for many years. Technical point On the forex market, the EUR/USD fell below the psychological threshold of 1.08 last week. The possibility of a slower and less pronounced easing by the U.S. Federal Reserve (Fed) has raised short- and long-term U.S. bond yields in recent weeks. Added to this is the possibility of a Trump victory. At the same time, the European Central Bank lowered its key interest rate for the third time two weeks ago and is expected to continue easing until key rates reach 2%. The slight change in expectations regarding U.S. key interest rates has contributed to widening the two-year swap spread between the two sides of the Atlantic, from 0.85% a month and a half ago to 1.39%. The widening rate spread has, in turn, put pressure on the euro. This largely explains the drop in the single currency over the past weeks. We believe this is set to continue.The supports and resistances shown below indicate the respective low and high points within which the exchange rates are expected to move during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.07131.07441.09221.0934EUR/GBP0.82730.82990.84000.8420EUR/CHF0.92660.92880.94650.9489EUR/CAD1.47991.48401.51001.5113EUR/JPY161.14162.98165.11165.22 Announcements to follow Unlike last week, this one is full of statistics. We do not expect the Bank of Japan (BoJ) to make another monetary policy change. This could occur in December or January. On the European side, French GDP in the third quarter is expected to come out close to 0.2%. Be careful, if the fiscal measures currently discussed in Parliament are implemented, a recession awaits next year (as was the case ten years ago when taxes were greatly increased). Unsurprisingly, it’s U.S. employment that will dominate the traders' attention. It’s the last significant statistic before the Fed meeting next week. A further decline in job creation in October would argue for another 25 basis point rate cut (the market now excludes a 50 basis point cut).Below you’ll find publications and events that should have a major impact on currency exchange rates.DayTimeCountryIndicatorWhat to Expect?10/29/202416:00USAConsumer Confidence (October)Previous at 98.7.10/30/202408:30FRAGDP (Q3)Previous at 0.2%.10/31/202405:00JAPCentral Bank MeetingNo change in monetary policy.10/31/202412:00EURCPI (October)Previous at 1.7% year-over-year.11/01/202414:30USAEmployment Report (October)Previous at 254k (but strong revision possible).