Uncertainties and Volatility The information presented in this publication is purely for informational purposes and does not constitute investment advice, a sales offer, 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 Central banks are expected to be on the sidelines in April. There are no major meetings in the G7 countries, except for the one by the Bank of Canada, which is expected to be a non-event. We expect FX to move based on risk appetite/aversion (partly linked to banking stress) and especially on the evolution of the economic situation, which remains uncertain. It was a week of respite. There were no significant central bank meetings, there were few statistics (except for eurozone inflation which we will discuss shortly), and the banking stress, which had caused a lot of turmoil on FX a few weeks ago, has eased. The CDS (Credit Default Swap) market, which allows covering against the risk of bank failure, has not returned to normal. Volatility is abnormally high. This is partly due to low liquidity (a large trade is enough to raise stress levels on CDS). But everything suggests that a financial crisis (similar to 2008) will not occur. However, there will certainly be an acceleration of the merger-acquisition process, more in the United States (where it is necessary) than in Europe. This process will be slow and will certainly not be without obstacles. This means we could have renewed market stress in the coming months that directly affects currencies (as usually happens when risk resurfaces, the Japanese yen should be the main winner). On the statistics front, there is still no obvious sign of recession in the United States. Despite inflation, the American consumer remains resilient. The consumer confidence index rose again in March to reach 104.2 from 103.4 in February, with a consensus of 101. This is good news, therefore. In detail, the component regarding economic outlook expectations also increased (73.0 vs. 70.4 in February). The component on the current situation, however, was slightly down (151.1 vs. 153.0 a month earlier). Inflation is the other downside. Expectations regarding price increases rose to 6.3% from 6.2% previously. Although everything is not perfect, this indicator (like others related to consumption) clearly shows that the US economy is generally doing well. Moreover, the real estate market bubble continues to deflate. It is an important point of attention. For now, the price decrease is happening in an orderly manner. Compared to its peak reached post-COVID, real estate prices in San Francisco are down 17.1% (and 7.6% over a year). In Seattle, the decline is 5.1% over a year. Miami is the only major US city where prices continue to rise – with an appreciation of 60.4% compared to the pre-COVID period. This is certainly largely linked to teleworking, which allows American employees to work from anywhere and particularly from Florida (which is more welcoming than New York in terms of climate and taxation). In the euro area, banking stress (even if it has dissipated) should lead to a decrease in credit in the economy and hence a slowdown in GDP. The decline had already begun at the start of the year. The money supply (especially M1, which is the most monitored indicator as it refers to deposits and circulating money) was contracting by 2.7% in February. This is a record. This means that growth will slow in the coming quarters. On the inflation front, there is good and bad. It depends on where you look. The consumer price index significantly slowed in the eurozone in March (falling to 6.9% year-on-year from 8.5% in February). This was somewhat expected (base effect + fall in energy prices). Conversely, core inflation increased. It now stands at 5.7%. It's not so much the recent rise that is concerning but the level. Core inflation is considered the best indicator for determining whether inflationary pressures are sustainable or not. With a level well above 2% on an annualized basis, it seems evident that inflation will remain a problem for a long time (especially for central bankers). According to us, the current level of core inflation should encourage the European Central Bank (ECB) to raise its policy rate by 50 basis points next month (there is no monetary policy meeting of the Governing Council in April). For the moment, persistent inflation has not yet caused a collapse in retail sales in the eurozone, but this is likely to happen (it has occurred in Sweden according to the latest data released last week). At some point, households are no longer able to cope. We are facing a rather fragile economic environment. Technical point In the foreign exchange market, the euro has regained a lot of ground against its main counterparts. The EUR/USD pair has risen by more than 1.17% on a weekly basis. Last week, volatility remained present (with a fluctuation range of more than 220 pips). One cannot rule out that a resurgence of banking stress could again weaken the euro. But the underlying trend remains upward, according to us. The pair just needs a catalyst to break out permanently from the area around 1.10. For now, nothing is in sight. The strong resistance of the pound sterling is noteworthy (+0.95% in a month against the euro). Finally, the UK situation is less worse than expected economically. This was confirmed last Friday. The GDP narrowly avoided recession with a 0.1% GDP increase in Q4 2022 after a contraction in Q3. In the medium term, the EUR/GBP pair should continue to evolve within a wide range between 0.87 and 0.89, as it has for several months.The supports and resistances below indicate the respective lows and highs within which prices should evolve over the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1.06881.07751.09451.1009EUR/GBP0.86020.86820.88900.8958EUR/CHF0.98110.98951.00891.0102EUR/CAD1.45401.46221.48901.5003EUR/JPY138.09141.39147.90148.90 Announcements to follow This week will not be particularly eventful regarding statistics. US employment in March is the main data to watch. The consensus forecasts 213,000 job creations. As long as it's above the symbolic threshold of 200,000, it's a good number. In other words, it is unlikely that changes in the US labor market will weigh much in the upcoming decisions of the US central bank. We will always keep an eye on banking stress, even though the risk has significantly reduced in a few sessions.Below are the publications and events that should have a major impact on currency price movements.DayTimeCountryIndicatorWhat to expect?04/03/202316:00USAISM Manufacturing Index (March)Forecast at 47.1 against 47.7 in February.04/05/202314:15USAADP Private Employment Survey (March)Decline to 200k from 242k in February.04/05/202316:00USAISM Non-Manufacturing Index (March)Consensus at 54.6 vs. 55.1 in February.04/07/202314:30USALabor Department Employment Report (March)Job creations at 213,000 against 265,000 previously.