Unbeatable America 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 an incentive to engage in any investment. The macro point Three themes are expected to influence the foreign exchange market this year: the decoupling between Europe and America, the ideological battle between big government and small government, and the risk of China's Japanization. We explain in detail what this means for currencies. The theme of European lagging will remain at the forefront in 2025, as long as Europe is caught between the US's hyper-attractive investment policy and China's sudden and aggressive price competitiveness. The American economic and financial hegemony is expected to increase. The United States represents only 4% of the global population but 25% of the global GDP, 31% of global household wealth, 46% of global venture capital investment, 65% of global stock market capitalization, and even 75% of the global benchmark stock market index, the MSCI World Index (a 55-year high). The US stock market is essential for anyone seeking returns. As a result, in 2024, the market capitalization of the US market increased by 7,110 billion dollars... a figure that turns heads. All this, of course, favors a strong dollar, as was the case in 2024 and at the start of 2025. Wars, crises, pandemic, Democrats or Republicans in power, whatever happens, the United States and the dollar win each time... We should have confirmation once again this year. Another important theme this year is the ideological battle between big government (à la française) and small government (notably represented by Mileism – in reference to Argentine president Javier Milei). In the Argentine case, Milei has had several successes, particularly at the exchange rate level. After a strong initial devaluation of the peso, he opted for a gradual devaluation of 2% per month (this is called a crawling peg). Result? The gap between the peso's value on the black market and its official value has radically decreased, approaching zero. If Milei manages to maintain this level, the risk of devaluation will be very low... which will reassure foreign investors that Argentina desperately needs to sustainably restart its economy. Finally, the last theme likely to influence the foreign exchange market this year is the risk of China's Japanization. How does this materialize? Through the bond market. Last week, China's 30-year sovereign rate fell for the first time below Japan's 30-year sovereign rate. This concretely means that investors anticipate Chinese growth will, in the long term, be lower than Japan's. It's a major paradigm shift. It's not entirely new. Over the past four years, the 30-year sovereign rate has dropped by 215 basis points. It's huge. At the same time, China went through six consecutive quarters of deflation – a first since 1999. It is certain that China's economic situation, which continues to deteriorate, will lead to many discussions in trading rooms about the possibility of a yuan devaluation in the coming months. Technical point In the foreign exchange market, the British pound has been particularly shaken, especially against the dollar, while yields on British bonds are skyrocketing. For now, the political class in London doesn't seem too concerned. But all this looks suspiciously like the beginning of a debt crisis. If you are exposed to the British currency, consider reviewing your currency hedging because there may be strong fluctuations in the weeks to come (a rerun of the crisis that led to Liz Truss's resignation cannot be excluded). The decline continues for Asian currencies, due to the strong dollar. The Chinese yuan, which is partially managed, has hit a 13-month low against the greenback. More worryingly, Bloomberg’s Asian currency index is at its lowest point in two decades. There's a sense of currency wars in Asia... Finally, the trend remains distinctly bearish for EUR/USD. In the absence of good economic news in Europe, it's hard to see what could prevent the pair from reaching parity this semester. The support zone located at 1.0227 should be monitored very closely. In the event of a break and close below this level, it's almost certain we'll see an acceleration of the decline. The support and resistance levels shown below indicate the low and high points within which rates are expected to evolve during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.02011.02251.04001.0410EUR/GBP0.82550.82900.84100.8435EUR/CHF0.92550.93090.94360.9478EUR/CAD1.47111.47891.49011.4955EUR/JPY159.88160.90162.99163.11 Announcements to follow U.S. inflation will be a major focus this week. The announced figures should be unsurprising. While inflation is receding, it remains high in the services sector, which could, according to some analysts, make the U.S. Federal Reserve think twice before lowering rates. China will also release its GDP estimate for the fourth quarter. This is a key issue for the market. Many analysts are betting on a massive budgetary stimulus in China, with measures targeting consumption in particular. For now, it's not materializing. We are in the skeptics' camp. December's Central Economic Work Conference, which sets China's economic priorities for the next year, has delivered little. Details will be revealed next March during China's parliamentary meeting. But a significant stimulus plan seems unlikely. China, in our opinion, will settle for easing access to credit and refinancing. This is obviously bad news for the European economy, which remains heavily dependent on China. Below you will find the publications and events expected to have a major impact on currency trends.DayTimeCountryIndicatorWhat to expect?01/14/20252:30 PMUSAProducer Prices (December)Previous at 0.4% month-on-month.01/15/20252:30 PMUSAConsumer Prices (December)Previous at 2.7% year-on-year.01/17/202503:00 AMCHINAQ4 2024 GDPPrevious at 4.6%