EUR/USD: the euro confirms its reaction to a less serene dollar

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The euro did not weaken in its reaction movement in the face of the dollar, not due to a revival of appetite for the risk, but for fear of an upcoming entry into recession of the United States. This possible inflection point of asymptote type on the health of the first economy in the world has been materialized for more than a month, by cascade disappointments on major indicators (U-Mich of households, retail sales, report on employment in particular.

“By demagoguery, by populism, the American president risks plunging his country into recession, a height!”, Says Philippe Crevel, in his last editorial of the Circle of Epargne.

“That the United States is confronted with an important trade deficit, $ 920 billion in 2024, is obvious. That this deficit is the consequence of dubious commercial practices, without a doubt. But the use of protectionism is real absurdity for a country which dominates all the major advanced sectors and which weighs more than a quarter of world GDP”.

Since the entry according to the impetuous, angry and exalted 47th President of the United States, the procrastination on customs duties in particular begin to instill doubt.

“This domination of the political scene complicates reading of macroeconomic implications and could potentially weigh more on the American economy. Companies, initially optimistic in the face of deregulation and tax cuts, must now deal with tariff increases, a reduction in migrant labor and uncertainties on subsidies”, analyzes Laura Corrieras, Equity Portfolio Manager at Indosuez Wealth Management.

On the other side of the Atlantic, on the other hand, the climate is very different, in particular for investors as shown in the impressive rebound in the Sentix index, which returns close to the neutral position. “Donald Trump will therefore have succeeded in a few days what most European countries have called for their wishes for more than a decade: blowing up the German budgetary lock”, synthesized Sébastien Grasset, Managing Director – Director of Asset Management of Auris Gestion.

Let us recall the announcement of a common desire of the parties brought to govern in Germany, to break the rule of budget, to inject several hundred billions of euros into infrastructure projects, and massive investments in the defense. A paradigm shift that directly influences the pair of Euro / dollar currencies.

“The defense therefore returns to the heart of the game in Europe. In addition to the German plan, the European Commission has, in fact, announced an investment program of 800 billion euros, including 150 billion in the form of loans to strengthen European defense capacities and has encouraged states to get rid of budgetary rules on military spending. If this budget revival will undeniably boost the growth of the euro zone MANAY MARGIES to durably increase their deficit. “

The expenses envisaged by Germany relate to defense of course, but also to infrastructure, which massively supported the actions of construction groups and materials on both sides of the Rhine.

“In the very short term, can the current German government make this pass through Parliament before the new government took office on March 24?” Asks Alexandre Drabowicz, Global Chief Investment Officer and Bénédicte Kukla, senior investment strategist Indosuez WM.

“Most likely yes, unless the Greens Party is changing their minds or some conservatives on the debt brake within the CDU of Friedrich Merz decide to withdraw. We think that a political signal of such magnitude would be difficult to withdraw, even if around and partial options are probable,” nuance the leaders in asset management.

The main macroeconomic meeting of the week is scheduled for tomorrow, with consumer prices in the United States. They are expected up 0.3% in February, excluding food and energy, against +0.4% in January.

“It is absolutely necessary good news, especially after the surprise increase of 0.4% over a month in January production prices. In terms of consumer prices, we must expect the price of eggs, which is a historic record due to avian flu, continues to lead statistics,” warns Christopher Dembik, investment strategy advisor at Pictet AM.

“In the process, the monetary market could still adjust its rate drop forecasts by the federal reserve. Two weeks ago, only one drop in rate was anticipated this year. Now, three are still likely to evolve as economic readability is small in the short term.”

At the macroeconomic agenda this Tuesday, to follow the new job offers (JOLTS) in the United States at 3:00 p.m. Tuesday.

It should be noted that the east coast of the United States has passed in the summer hour. Therefore, and while waiting for mainland France to pass, Wall Street will open at 2:30 p.m., instead of 3.30 p.m.

At midday on the foreign exchange market, the euro was treated against $ 1,0890 approximately.

Key graphics elements

The crossing in significant volatility of $ 1,0608 changes the situation on the configuration of the currency pair, which has just validated a resumption of support on a long mobile average, at 50 days (in orange), which begins a resource figure. The scenario of a fast melting towards the perfect parity (€ 1 = $ 1) is invalidated.

Medium term

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on Euro dollar parity (Eurusd).

We will keep this neutral opinion as long as the EURO Dollar parity prices (EURUSD) are positioned between the support at 1,0758 USD and the resistance to USD 1,1012.

Daily data graphics