Unmissable America The information presented in this publication is provided for informational purposes only and does not constitute investment advice, or an offer to sell, or a solicitation to buy, and should not be used as the basis or considered as an inducement to engage in any investment. The macro point Our conviction for 2025 is that a strong dollar will remain the norm. International investors are only betting on the American economy, leading to inflows that will fuel the American stock market and support the dollar, both of which are at record levels. Conversely, the eurozone seems doomed to long-term economic stagnation. The economic differential clearly argues in favor of a decline in the EUR/USD over time. The American economy continues to outperform the rest of the world. As a result, capital continuously flows into the United States, fueling the rise of the American stock market and the dollar. For example, during the period from November 5 to 13, American ETFs (which replicate the performance of a stock index) and mutual funds attracted nearly 56 billion dollars. It is the second-largest weekly inflow since 2008. It's just incredible. Almost everyone is betting on the American economy. This was already the case before Trump's election because Biden's economic record was rather very good (relocation of activity, inflation control, energy transition, investments in artificial intelligence, etc.). It is even more so since the presidential election, as investors anticipate that the budget deficit will remain very high – around 7% of GDP – and continue to positively fuel the economy, bringing growth and productivity. Quite the opposite of what is happening in the eurozone, unfortunately. Here, debt is present, but it mainly serves operating expenses and to prolong a social model that needs to be reformed, while the focus should be on creating additional wealth. The strength of the dollar, which results from the attractiveness of the American economy, should not vanish anytime soon. This is often a problem for emerging countries – particularly because traditionally many borrow on international markets in USD. Fortunately, the situation has improved compared to about a decade ago. Overall, emerging countries have better economic fundamentals, have managed the Covid crisis better than G10 countries (the most developed countries), and have reduced their exposure to USD financing. Argentina is certainly the best example in this regard. A few quarters ago, the country was on the brink of bankruptcy. Now, growth is recovering, price drift has been stopped, and the budget deficit, which was around 6% of GDP, should be completely eliminated next year. This required significant efforts in terms of reducing public spending (only universal household allowances have been preserved) and has created some turbulence in the foreign exchange market, which was quickly contained by central bank interventions. Turkey was also in a similar situation. Now its credit rating has been upgraded, monetary policy has returned to orthodoxy and inflation control, the financial system is less dollarized, and the balance of payments has significantly improved. The central bank occasionally intervenes in the currency market to control the exchange rate of the national currency. But that's normal. Unlike what might have happened in the past, the current period of a strong dollar we are in is not expected to lead to major upheavals for emerging countries. As proof, there were no emerging market defaults in 2024, and it is unlikely there will be any next year. This is good news. Technical point In the foreign exchange market, the rate differential between the two sides of the Atlantic favors a drop in the EUR/USD pair. The market is expecting a 10 basis point cut by the U.S. Federal Reserve - Fed in December (we expect a 25 basis point cut) against 31 basis points for the European Central Bank - ECB (we expect a 50 basis point cut). Of course, if the Fed cuts rates by 25 basis points and the ECB only by 25 basis points, the EUR/USD might see a slight increase. But it is unlikely to be sustainable. The downward trend on the pair is very marked. Moreover, one can observe significant selling movements in a context of low volatility, as was the case in last Friday's session. Meanwhile, for now, the EUR/JPY pair stands around 160-163 - a 5% increase since the start of the year. However, the prospect of significant monetary tightening by the Bank of Japan as early as next month could propel the pair towards 150 according to the Bloomberg consensus. The support and resistance levels shown below indicate the low and high points within which the rates are expected to move during the week.Weekly SupportsWeekly ResistancesS2S1R1R2EUR/USD1,03591,03901,06451,0710EUR/GBP0,82490,82830,84000,8410EUR/CHF0,92440,92690,94000,9423EUR/CAD1,45831,46001,48091,4845EUR/JPY160,35161,00163,11163,99 Announcements to follow Eurozone inflation is the key statistic of the week. No surprises there. Inflation should continue to decline below the 2% target, providing ample room for the European Central Bank (ECB) to continue its rate-cutting policy. Some analysts predict an acceleration of the rate cut pace due to potential tariffs from the Trump administration. This misunderstands the ECB. It should continue its cautious approach and opt for only a 25 basis point cut in the policy rate in December (even if market pressure favors a 50 basis point cut). We still believe that the ECB is not acting quickly enough to support economic activity in the eurozone, which will result in lost growth points this year and in 2025. Weak growth often means a weak currency. Something to ponder... Below you will find publications and events likely to have a major impact on currency trends.DayTimeCountryIndicatorWhat to expect?11/25/202410:00GERBusiness Climate (November)Previous at 86.5.11/27/202416:00USACore PCE Index (October)Previous at 2.7% year-on-year.11/29/202411:00EURConsumer Prices (November)Previous at 1.7% year-on-year.