Economic Situation
The word “stagflation” is on the lips of analysts everywhere, but let us be clear: we have not reached that point yet, and panic is not warranted as long as vigilance remains.
German inflation expected at +2.4% in May remains barely above the ECB target, and Germany’s GDP even surprised on the upside in Q1 with +0.3% quarter-on-quarter. It is hard to call this stagnation under such conditions.
Yet three signals deserve attention. Budget deficits are widening, with France at 5.1% of GDP and Germany at 3.7% according to the European Commission, which reduces governments’ capacity to absorb a fresh shock.
The US-Iran confrontation keeps Brent around $105 a barrel, up 25% since January, an energy pressure that is gradually seeping into production chains. And British industrial order books, a solid leading indicator for Europe, are at their weakest since 2020.
The ECB finds itself in a bind. A rate hike in June seems likely, but it would probably be the last one of the cycle. The real question then becomes: when will the first easing occur, in the autumn or later?
For the euro, this uncertainty already weighs on it. EUR/USD has moved from 1.2019 to 1.1617 over four months, supported by a real rate differential that continues to favor the dollar. If the eurozone indeed slides into stagflation this summer, the ECB would have little real room to maneuver, and the single currency would keep retreating.
German inflation expected at +2.4% in May remains barely above the ECB target, and Germany’s GDP even surprised on the upside in Q1 with +0.3% quarter-on-quarter. It is hard to call this stagnation under such conditions.
Yet three signals deserve attention. Budget deficits are widening, with France at 5.1% of GDP and Germany at 3.7% according to the European Commission, which reduces governments’ capacity to absorb a fresh shock.
The US-Iran confrontation keeps Brent around $105 a barrel, up 25% since January, an energy pressure that is gradually seeping into production chains. And British industrial order books, a solid leading indicator for Europe, are at their weakest since 2020.
The ECB finds itself in a bind. A rate hike in June seems likely, but it would probably be the last one of the cycle. The real question then becomes: when will the first easing occur, in the autumn or later?
For the euro, this uncertainty already weighs on it. EUR/USD has moved from 1.2019 to 1.1617 over four months, supported by a real rate differential that continues to favor the dollar. If the eurozone indeed slides into stagflation this summer, the ECB would have little real room to maneuver, and the single currency would keep retreating.
Exchange Rates: The Technical Snapshot
EUR/USD hovers around 1.1625 this Monday after a 1.4% pullback over the week, well off the peak of 1.1784 touched ten days ago. The 1.15–1.17 zone should cap trading this week.To breakout above 1.18, a clear signal of de-escalation in Hormuz would be required. To slip below 1.15, hawkish FOMC minutes or another acceleration in inflation would be needed. Both scenarios remain plausible.
The Swiss franc continues to defy gravity even as the dollar recovers. EUR/CHF trades between 0.9150 and 0.9200. The CHF is no longer just a cyclical safe haven; it has become a structurally strong currency. As long as Hormuz remains tense, betting against the Swiss franc looks risky.
The yen, meanwhile, stays under pressure. EUR/JPY sits around 186, and the weekend underscored the central issue: Prime Minister Takaichi publicly praised the benefits of a weak yen while her Finance Ministry attempts to curb depreciation. This internal contradiction prevents a durable rebound. The risk of BoJ intervention is rising again, making this pair one to watch closely.
The pound stays trapped in a vise. EUR/GBP ranges between 0.8580 and 0.8620. The Bank of England should hold rates steady, and Wednesday’s UK inflation will be the real catalyst. With a forecast rise to 3.4% year-on-year, the pound suffers from a paralyzed central bank and a cooling economy, a combination that leaves little room for maneuver.
| WEEKLY SUPPORTS | WEEKLY RESISTANCES | |||
| S2 | S1 | R1 | R2 | |
| EUR/USD | 1.1480 | 1.1550 | 1.1700 | 1.1780 |
| EUR/GBP | 0.8560 | 0.8600 | 0.8680 | 0.8720 |
| EUR/CHF | 0.9050 | 0.9080 | 0.9150 | 0.9200 |
| EUR/CAD | 1.5850 | 1.5950 | 1.6080 | 1.6180 |
| EUR/JPY | 182.50 | 183.80 | 185.80 | 187.00 |
The supports and resistances shown below indicate, respectively, the lower and upper points within which prices are expected to move during the course of the week.
The information presented in this publication is provided for informational purposes only and does not constitute investment advice, nor a sell offer, nor a solicitation to purchase, and should in no way serve as a basis or be considered as an incentive to engage in any investment.
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Mondial Change also supports numerous players in tourism: travel agencies, group organizers, tour operators, receptive units…
www.mondialchange.com
Contact: [email protected]
