Trump's Thunderous Return
A strong dollar should be one of the consequences of the Trump era this year. The greenback continues its appreciation particularly against Asian currencies (in the absence of intervention from the region's central banks). In the short term, however, we do not rule out a short-lived rebound of the euro. Over the past five sessions, the EUR/USD pair has risen by 0.89%. How to explain this? THE FLOWS! Capital flows into the eurozone equity market reached their highest level in 25 years in January, according to Bank of America figures. Many foreign investors want to take advantage of the discount on European stocks, which has the effect of supporting the euro a little and probably temporarily. In the long term, unless there is a significant change in the economic trajectory in Europe, we do not see what could prevent the euro from weakening against the dollar.
The macro point
Trump's return to the White House coincides with a return of volatility across all financial markets, including currencies. This week is busy and uncertain: the Fed might decide to keep its rates unchanged, and new prohibitive tariffs could be announced by the American administration against Canada on February 1st. No rest in sight! It's only been a week since Donald Trump became the new American president. Many things are going to change. We have compiled the main announcements made in recent days: Customs Tariffs Trump rekindles his trade war with a study on relations with China, Canada, and Mexico. The goal? Create an 'External Revenue Service' to collect billions of dollars in import taxes. New tariffs against Canada could notably be announced on February 1st. Strengthened Borders He declares a 'national emergency' at the southern border: Deployment of troops to secure the border. Resumption of the construction of the wall with Mexico. New rules to expedite deportations. Immigration The end of 'birthright citizenship' (nationality for children of undocumented immigrants). Trump also suspends refugee programs for six months and reinstates the 'Remain in Mexico' policy for asylum seekers. Energy & Climate Trump announces the opening of new drilling in Alaska and offshore. He also promises to fill the strategic oil reserves 'to the top' and ends subsidies for wind energy. However, this should not undermine the energy transition, which is mainly driven by the private sector (cost of renewable energy production lower than that of fossil energy). Cultural & Gender Policy Trump redefines federal policies: Return to a strict 'male/female' definition. End of diversity programs in the administration and the military. Economic Nationalism With the famous 'America First', Trump implements measures to boost domestic production and reduce external dependencies, especially in energy and industry. Justice and Security Trump wants to reintegrate with salary the military expelled for refusing Covid vaccination. He also promises strong measures against cartels, designated as terrorist organizations. But the most notable announcement is certainly the decision to invest 500 billion dollars in the infrastructure necessary for AI. In comparison, the amounts mobilized in Europe are paltry, not to mention the growing regulatory weight that stifles innovation. One can certainly criticize many of the American president's positions. What is certain is that the next four years will likely significantly accentuate the decoupling between Europe and the United States. As a reminder, the GDP per capita differential between an American and a French person is 30 points. That's huge. It's as much as between a French person and a Turk...
Technical point
The supports and resistances listed below indicate the low and high points within which the rates should evolve during the week. | Weekly Supports | | Weekly Resistances | |
|---|
| S2 | S1 | R1 | R2 |
| EUR/USD | 1.0288 | 1.0390 | 1.0490 | 1.0545 |
| EUR/GBP | 0.8290 | 0.8319 | 0.8490 | 0.8510 |
| EUR/CHF | 0.9302 | 0.9333 | 0.9490 | 0.9510 |
| EUR/CAD | 1.4721 | 1.4888 | 1.4988 | 1.5020 |
| EUR/JPY | 158.88 | 159.90 | 162.99 | 163.09 |
Announcements to follow
Trump's return coincides with a much busier news agenda on the economic front. New tariff announcements are expected at the end of the week by the U.S. administration and could specifically target Canada. In addition, there are several central bank meetings. Unsurprisingly, the Bank of Canada (BoC) and the European Central Bank (ECB) are expected to continue lowering their rates (-25 basis points). The decision of the U.S. Federal Reserve (Fed) is more uncertain. We believe it could also lower its benchmark rate by 25 basis points. But it is not guaranteed. It could also consider it appropriate to wait for more information on the new American tariff policy and its implications, and thus opt for a status quo in January. It's a 50/50 chance. In any case, expect much more volatility in financial markets now that Trump is back in the White House. Below are the publications and events that should have a major impact on the evolution of exchange rates.| Day | Time | Country | Indicator | What to expect? |
|---|
| 01/27/2025 | 10:00 | DE | IFO Business Climate Index (January) | Previous at 84.7. |
| 01/29/2025 | XX:XX | CHINA | Start of Chinese New Year | Period conducive to high CNH volatility |
| 01/29/2025 | 15:45 | CAN | Central bank meeting | 25 basis point cut |
| 01/29/2025 | 20:00 | USA | Central bank meeting | Possible monetary status quo |
| 01/30/2025 | 14:15 | EUR | Central bank meeting | 25 basis point cut |
The information presented in this publication is communicated to you for purely informative purposes and does not constitute investment advice, an offer to sell, or solicitation to buy, and should in no way serve as a basis or be considered as an incentive to engage in any investment.