EUR/USD: The 2nd economy in the euro zone takes the path of austerity

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The euro crossed a small air hole yesterday, to put on the account of the disclosure of budgetary arbitrations by the French Prime Minister, François Bayrou, who clearly assumed the choice of rigor for the second economy of the euro zone. An air hole that does not question at this stage the bottom upward trend of the spot, the dollar being, in the background, largely penalized by the fear of a loss of its hegemony in world trade, against the backdrop of customs war.

This plan amounts to 43.8 billion euros in savings for 2026. The head of government indicated that it wanted to bring the public deficit to 4.6% in 2026 to increase to 2.8% in 2029. Which, in his plan, will go through a “white year”, in 2026, during which the expenditure of the State (excluding defense and load of debt) will be frozen as well as social benefits. This plan, which must be amended and voted by Parliament, is therefore far from final.

The Bover yesterday composed with contrasting figures on American inflation. Inflation in the United States therefore increased by 2.7% over a year in June, against a consensus at 2.6% and after 2.4% in May, according to the CPI consumer price index. The underlying inflation, “Core”, that is to say excluding energy and food prices, it came under 2.9% expectations in annual sliding in June against 2.8% the previous month and 3.0% according to a consensus built by the Wall Street Journal.

In all cases, the prospect of a decrease in federal rates at the end of the month continues to move away, the probabilities of a contraction of 25 base points of the Fed Funds remaining famelical within the meaning of the Fedwatch tool of the CME Group (2.6%!).

In addition, the Bover composed with the publication of the ZEW index of confidence in the German economy by the eponymous institute. The score, awaited up to 50.8, exceeded expectations by emerging at 52.7.

“After the strong improvements of the last two months, the positive feeling of the respondents is confirmed,” comments Professor Achim Wambach, the president of the ZEW.

“Despite the persistent uncertainty linked to global commercial conflicts, almost two thirds of experts anticipate an improvement in the German economy. The hope of rapid resolution of the pricing conflict between the United States and the EU, as well as any economic recovery measures provided by the German government’s immediate investment program, seem to influence the general feeling. This increased optimism is reflected in particular in clear expectations for clearly improved expectations Mechanical engineering and metal production, followed by the electrical industry. “

To be continued at 2:30 p.m. this Wednesday, the production dynamics in production in the United States. An interesting complement after the publication of retail prices.

At midday on the foreign exchange market, the euro was treated against $ 1,1620 approximately.

Key graphics elements

While the 1,1674 were broken in a certain volatility, we are waiting to gauge the quality of the spot reaction in contact with the mobile average at 50 days (in orange). So far, this substantive trend curve

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 courses of Euro Dollar parity (EURUSD) are positioned between the support at 1,1460 USD and the resistance to 1,1970 USD.

Daily data graphics