After a week refocused on the ECB's decision on European rates, last week was all about the U.S. Federal Reserve, whose decision on key rates the markets were eagerly awaiting. Investors were waiting to see to what extent the FED would slow its pace of rate cuts: Federal Reserve Governor Jerome POWELL decided to cut the main rate by 25 bps, from 4.5 to 4.25%, although this cut was only half of what was expected in September. Mr. Powell's speech also reminded us that the economy is still strong, that inflationary risks are still present, and that he does not anticipate more than 2 rate cuts for 2025, down to 3.75%.

This intervention contrasts with that of the ECB, which opens the door to 5 further 25 bps cuts to reach a rate of 2% by mid-June 2025: the eurozone economy is fragile and needs the ECB's support, the private sector contracted further in November in Germany and France, inflation continues to slow from +2.3 to +2.2%, and the political situations in Germany and France have been chaotic for several months.

The consequences on the markets were clear: the EURUSD broke through the 1.0400 threshold once again, with the result that parity will be targeted as early as September 2025, especially as Donald TRUMP will be implementing his first measures from January 20, which we expect will further strengthen the USD in the short term.