Unseen Since 2020
It's summer, so let's start with some good news. Liquidity is very abundant in financial markets, including the forex market. Since the beginning of the year, there have been 64 rate cuts by central banks worldwide. This is a record since the pandemic in 2020. For example, the European Central Bank (ECB) has lowered its benchmark rate four times since the beginning of the year. At least one more rate cut is expected to occur. The Swiss National Bank (SNB), the Bank of England (BoE), and the Bank of Canada (BoC) have each cut rates twice already, with more to come. All this while the US Federal Reserve (Fed) is rather reluctant to ease the cost of money, much to President Trump's dismay. Liquidity is crucial because it ensures the smooth functioning of financial markets. Moreover, it also flows into the real economy. Economists disagree on the exact timing, but generally, a rate cut affects the economy with a lag of 8 to 12 months (some say 18 months). In any case, this means that growth in 2026 could be surprisingly positive. This is already good.
The macro point
Nothing seems to stop the depreciation of the dollar, especially against the euro. Since the beginning of the year, the EUR/USD pair has increased by +14%. The target we mentioned last week at 1.20 could be reached as early as this summer. We also have good news to share with you: the economy is expected to accelerate at the end of the year thanks to the abundant liquidity injected by central banks. In the eurozone, German inflation came in at 2% year-on-year in June (the first estimate should be confirmed this week). This is exactly the ECB's target. No major country in the eurozone faces notable inflationary pressures. Moreover, we doubt that the trade war between Brussels and Washington will lead to a generalized price increase. Therefore, if the ECB wishes, it is able to lower its key interest rate again. It is currently at 2%. It could be reduced to 1.50% according to us.
In China, the situation is more complex than elsewhere. Since the beginning of the year, Beijing has decided to focus on boosting consumption. This is sluggish due to the real estate crisis (real estate accounts for 60% of Chinese household wealth compared to a maximum of 30% in developed countries) and weak wage increases. It is on this latter point that the government wishes to act. But this will take time. We believe it will take at least two to three years for consumption to recover sustainably.
In the industry sector, there are some great nuggets, particularly a rapidly developing AI ecosystem (DeepSeek). In 2019, China surpassed the United States by becoming the world's leading patent filer. The Chinese company driving this field is Huawei, a telecommunications equipment provider and 5G specialist subject to US sanctions as part of the trade war. Thus, for the year 2023 alone, Huawei filed no less than 4,411 patent applications, which is twice as many as Japanese Mitsubishi. There are also entire segments of the industry that lag behind, with sectors where margins and profits are plummeting. Take the example of semiconductors. Two years ago, the average net profitability rate was 14%. It is now close to zero. This is an abysmal drop in a very short time. Before China can one day consider surpassing the United States, it will first need to address its many internal problems.
Technical point
In the forex market, the euro is still the big winner this year, up +14% against the dollar, +11% against the Chinese yuan, and +4% against the Japanese yen. This is mainly explained by the massive inflow of capital into Europe, particularly from asset managers who were overexposed to the dollar in 2024. This is not at all related to better European macroeconomic dynamics. Just look at the evolution of industrial production, which is contracting in several major European countries, to realize this.
In the current context, we believe that EUR/USD should continue to climb. Our first target is 1.20. If breached, the pair could attempt to reach the resistance at 1.2340. For EUR/GBP, we have a target at 0.8765.
The supports and resistances displayed below indicate the respective low and high points where prices should evolve during the week. | Weekly Supports | | Weekly Resistances | |
|---|
| S2 | S1 | R1 | R2 |
| EUR/USD | 1.1590 | 1.1630 | 1.1910 | 1.2000 |
| EUR/GBP | 0.8490 | 0.8523 | 0.8699 | 0.8722 |
| EUR/CHF | 0.9250 | 0.9300 | 0.9411 | 0.9450 |
| EUR/CAD | 1.5790 | 1.5888 | 1.6212 | 1.6300 |
| EUR/JPY | 166.99 | 168.10 | 170.88 | 172.22 |
Announcements to follow
As is always the case at this time, the economic agenda is less busy.
The only notable event is the Reserve Bank of Australia's meeting this Tuesday, which could result in a 25 basis point rate cut. This should not have any real influence on the EUR/AUD pair, which has been on an upward trend for several months.
Below are the publications and events that are expected to have a major impact on currency rate movements.
| Day | Time | Country | Indicator | What to expect? |
|---|
| 08/07/2025 | 06:30 | AUSTRALIA | Central Bank Meeting | Previous at 3.85% |
| 09/07/2025 | 08:00 | GERMANY | Inflation (June) | Previous at 0.1% month-on-month. |
The information provided in this publication is purely for informational purposes and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should not serve as the basis or be considered as an inducement to engage in any investment.