Exchange Rates: Euro Under Pressure Against the Dollar as Central Banks Pause


Economic Situation

Taux de change : l’euro sous pression face au dollar, les banques centrales temporisent - Depositphotos.com, Auteur pedro2009

PONANT


The U.S. Federal Reserve (the Fed) and the European Central Bank (the ECB) are expected to move on the same dates: nothing at the end of October, followed by a rise in their interest rates in December.

Since this scenario is already priced in, it will no longer differentiate the two currencies before January, unless a surprise, and it could come from the September U.S. inflation, published on Wednesday. In the background, energy prices remain the real risk.

American expectations moved quickly. Barely had the U.S. rate been set in the 3.75% to 4.00% range, investors priced in, by nearly 75% on September 29, a further increase on October 28. They now believe it with less than 20% probability. John Williams, one of the Fed’s leaders, ruled out any rush, and the country created only 29,000 jobs in September. The move is deferred, not canceled: by the December meeting, the probability of a hike is judged likely at 84%.

The ECB should follow the same path. Reuters polled 73 economists on October 8: 70 see it keeping its rate at 2.50% on October 29, and 64 expect it to raise in December. Again, the scenario is known, thus already priced in. Only a revision would move the markets: some capital would then flow toward the currency with the fastest rising yields.

The euro has fallen for five weeks in a row, the latest week a soft one, and it was worth 1.1210 dollars this morning. The risk, in our view, remains oil. Europe buys it abroad and settles in dollars, while the United States sells more than it consumes: a price spike weighs only on the former.

Or Riyadh was attacked this weekend, and tankers were targeted near the Strait of Hormuz, which keeps the pressure. Winter budgets are therefore built on fuel that remains expensive and on dollar-denominated services that will not become cheap again.



Exchange Rates: The Technical View

Bearish bets against the euro remained buoyant last week : short positions held by speculators weighed 99,300 contracts as of Tuesday, October 6, up 36,000 over seven days.

A U.S. inflation figure weaker than expected would force them to buy back euros. In our view, such purchases would push the European currency toward 1.13 dollars quickly, while a fall toward 1.11 would occur more slowly.

The U.S., Canadian and Japanese debt markets are closed this Monday: there are therefore few buyers and sellers. Oil, however, reacted to the news. Brent opened at $105.48, before retreating toward $103.90 when the United States hinted that Russian diesel could circulate. Currencies remained almost unmoved: 1.5977 Canadian dollars per euro this morning, 177.27 yen, the pound at 0.8463 and the Swiss franc at 0.9299. These levels will only be taken for granted after Tuesday’s session.

Thailand, meanwhile, is quietly firming ahead of winter. The baht has strengthened for a month: it took 38.31 bahts to buy one euro on September 9, versus 37.57 at the ECB reference rate on October 9, i.e., 1.9% less. A transaction priced by a Bangkok or Phuket intermediary at the back-to-school rate thus sees its margin shrink.


WEEKLY SUPPORTS WEEKLY RESISTANCES
S2 S1 R1 R2
EUR/USD 1.0986 1.1098 1.1322 1.1434
EUR/GBP 0.8294 0.8378 0.8548 0.8632
EUR/CHF 0.9113 0.9206 0.9392 0.9485
EUR/CAD 1.5657 1.5817 1.6137 1.6297
EUR/JPY 173.72 175.50 179.04 180.82


The supports and resistances shown below indicate respectively the lower and upper points within which prices are expected to move during the week.



The information presented in this publication is provided for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should in no case be used as a basis or be considered as an incentive to engage in any investment.


Mondial Change is a French financial institution, founded in 2015, specializing in the management of international payments and exchange rate risk.

Mondial Change supports many players in tourism, travel agencies, group organizers, tour operators, incoming operators…

www.mondialchange.com

Contact : [email protected]


Currency Exchange Rates: Dollar Falls, Euro Remains Uncertain [ABO]


Economic Situation

Taux de change : le dollar recule, l’euro sous pression - Depositphotos.com Auteur fotoscool

PONANT


Prices rose by 3.7% in a year in the United States in September, after 3.4% in August, and the American currency nevertheless lost ground. The reference rate published by the European Central Bank set one euro at 1.1253 dollars on Friday, i.e. 0.42% higher than seven days earlier. Dollar-denominated services, including North American hotels and cruises, have therefore eased slightly.

This acceleration is almost entirely due to gasoline, whose price jumped by 9.1% in a month: by itself it explains more than half of the rise. Excluding energy and food, the year-over-year increase stands at 2.6%. The U.S. Federal Reserve, the Fed, can therefore wait before another rate hike, allowing time to ensure that expensive fuel does not push up other prices.

Investors reassessed this in three days. On Wednesday, they were still assigning roughly a 50% chance of a rate increase on October 28. Several Fed officials then judged there was no urgency, and Kevin Warsh, who leads the institution, did not want to reveal the decision in advance on Friday. The probability fell back to around 15%, and lower expected rates make the dollar less attractive.

The American stock market did the rest. Technology stocks fell 4.5% in a week and distrust spread to the bonds financing data centers. Investors sought refuge in U.S. government debt, not in the country’s currency.

Crude oil rose 4.9%: Europe, which buys its energy abroad, loses on this, but expensive energy makes a December European rate hike more likely, supporting the euro. The dollar, in our view, can still weaken if this American credit malaise persists; it would rise if it spread worldwide.



Exchange Rates: The Technical Update

The euro is losing ground this Monday morning against each of the currencies we track, likely due to the violence that erupted during the French demonstrations.

It trades at 0.9253 Swiss francs, 0.8421 pounds, 1.1225 dollars and 1.5847 Canadian dollars. In addition, 177.47 yen are required to buy one euro. Last week, the euro had already fallen 0.45% against the pound and 0.44% against the franc: it is not strong, it is the dollar that has weakened.

We anticipate the European currency moving from 1.1105 to 1.1350 dollars by Friday. The lower bound assumes France borrows more expensively before Moody’s rating review, while the upper bound assumes the American credit strain worsens without spreading to other countries. Four central banks are due to speak next week, and inactivity dominates: a US hold is deemed likely at 84% by markets, and among 73 economists surveyed by Reuters, 70 expect no change on the European side. It is therefore better to stagger dollar purchases rather than committing everything before these meetings.

South Africa, entering its peak season, leaves little room for European buyers. The rand stood around 16.44 per dollar on Friday, up 0.3% for the day, supported by gold and platinum prices, the country’s two main exports. The dollar, for its part, recorded its first weekly decline in five weeks. It now takes about 18.5 rands to buy one euro, slightly less than at the start of September. A safari or a Cape Town circuit priced in rands yields no additional margin on departures already sold.


WEEKLY SUPPORTS WEEKLY RESISTANCES
S2 S1 R1 R2
EUR/USD 1,1105 1,1150 1,1270 1,1350
EUR/GBP 0,8340 0,8385 0,8460 0,8505
EUR/CHF 0,9170 0,9210 0,9300 0,9340
EUR/CAD 1,5730 1,5780 1,5945 1,6020
EUR/JPY 175,70 176,60 178,40 179,30


The supports and resistances shown below indicate, respectively, the low and high points within which prices are expected to move during the week.



The information presented in this publication is provided purely for informational purposes and does not constitute investment advice, nor a sales offer, nor a purchase solicitation, and should in no case be used as a basis or be considered as an incentive to engage in any investment.


Mondial Change is a French financial institution, founded in 2015, specializing in the management of international payments and exchange risk.

Mondial Change also supports numerous tourism sector players, travel agencies, group organizers, tour operators, and incoming operators…

www.mondialchange.com

Contact : [email protected]


Exchange Rates: Where Is Travel Most Expensive? [ABO]


Economic Situation

Taux de change : où les voyages coûtent-ils le plus cher ? - Depositphotos.com Auteur chrupka

CroisiEurope


Exporting Gulf oil is picking up again, but it is steering clear of Europe. The Middle East shipped 12.8 million barrels per day in September, hailed as a record since February, but this is mistaken: there is still a shortfall of six million barrels compared to that month, and transit through Hormuz has fallen to 7.4 million barrels per day, versus roughly a dozen to fifteen a year ago.

Yet Saudi Arabia has more than doubled its September loadings to 5.4 million barrels per day after 2.4 in August. However, they exit via Ras Tanura and head for Asia.

The pipeline linking the kingdom to the Red Sea was damaged on September 10 and 11. It has only been back in operation since the 23rd, at a reduced throughput. Aramco has even informed at least two European refiners that no cargo would reach them in October.

These missing barrels are being replaced at a high price. Norwegian crude Johan Sverdrup fetched as much as $35 more per barrel than the Brent benchmark, a gap that had stood at just 60 cents on September 8. The disruption mainly affects refined fuel: the Gulf is shipping only a quarter of the diesel sold before the war, and every barrel converted into Europe yields more than $85 for refiners, like never before.

At the pump, the diesel price stood at €2.399 per liter on September 25, a level that the March 2022 peak of €2.1407 had not reached. In one out of ten stations, at least one type of fuel was out of stock.

The €450 million in targeted subsidies announced by the state will not lead to lower displayed prices. In our view, this European disadvantage will persist as long as Gulf barrels head toward Asia: transfers, coaches, and winter travel are therefore budgeted on fuel that remains durably expensive.



Exchange Rates: The Technical Update

The euro closed Friday at 1.1391 dollars, down 0.81% on the week, marking its third consecutive decline. A floor is emerging between 1.1323 and 1.1353; if it yields, the path could open toward 1.09, which we do not expect. Our short-term range stands from 1.13 to 1.15.

Services priced in dollars, including North American hotel stays and cruises, are therefore a bit more expensive than in August, with no break in sight.

The Canadian dollar had everything going for it to benefit from the crisis, since Canada sells oil. It did not benefit: one euro was still worth 1.6111 Canadian dollars on Friday. Its central bank did not tweak its rate, kept at 2.25%, and Alberta ships its crude by pipeline to its American neighbor at a discounted price.



The yen, however, deserves attention.


Japan and the United States had jointly bought yen in August to support the Japanese currency, and Tokyo reminded on September 24 that this arrangement remains in force. A yen buyer thus faces two risks: the market, and a political decision capable of sending the currency surging. It took 179.17 yen to buy one euro on Friday evening.

Morocco, for its part, offers unusual visibility. The dirham’s value is pegged to a basket consisting of 60% euros and 40% dollars, within a fluctuation margin of 5%, so it never strays far from the euro.

The dirham is slowly retreating for four weeks, down 0.3% between September 17 and 23, to around 10.945 dirhams per euro. A Marrakech-traded circuit therefore settles at the same price as in August on the exchange, when fuel nonetheless weighs on it.


WEEKLY SUPPORTS WEEKLY RESISTANCES
S2 S1 R1 R2
EUR/USD 1.1323 1.1359 1.1450 1.1495
EUR/GBP 0.8520 0.8560 0.8635 0.8680
EUR/CHF 0.9355 0.9400 0.9475 0.9520
EUR/CAD 1.5960 1.6040 1.6190 1.6270
EUR/JPY 176.60 178.00 180.50 181.90


The supports and resistances shown below indicate, respectively, the lower and upper bounds within which prices are expected to move during the course of the week.



The information presented in this publication is provided for purely informational purposes and does not constitute investment advice, nor an offer to sell, nor a solicitation to buy, and should in no way be used as a basis or be taken into account as an incentive to engage in any investment.


Mondial Change is a French financial institution, founded in 2015, specializing in international payments management and foreign exchange risk.

Mondial Change also supports numerous players in tourism, travel agencies, group organizers, tour operators, and incoming operators…

www.mondialchange.com

Contact : [email protected]