International highlights
An intensification of trade tensions
The EUR/USD pair depreciated this week by -0.76%, from 1.1778 to 1.1689, a two-week low. As the 90-day trade truce expired on July 9th, Trump sent official letters this week to more than 14 countries to impose significantly higher tariffs, starting August 1st. These additional tariffs range from 20% to 50%. This is 30% for EU in addition to the current 50% tariffs on steel and aluminum and the current 25% tariffs on cars from the EU. Trump also announced universal tariffs of 50% on copper, regardless of the country of origin. In the absence of a trade agreement between the United States and the EU, trade tensions weakened the Euro this week.
MAD evolution and foreign exhange market liquidity indicators
Liquidity spreads are close to the floor level
The USD/MAD appreciated by +0.32%, increasing from 8.98 to 9.01 this week. This weekly variation was driven by a positive basket effect in favor of the Dollar. It stood at +0.46% after the Dollar's appreciation against the Euro this week. The liquidity effect, meanwhile, was negative at -0.14%. Liquidity spreads thus eased by -14 BPS to -4.93%, approaching the MAD's lower fluctuation band of -5.00%. These levels remain at their lowest in more than three years, thanks to lower import flows related to the decrease of fuel prices.
Volatility indicators
Market volatility fueled by trade tensions
At the end of the 90-day pause since the announcement of the new tariffs on "Liberation Day," Trump announced tariffs on imports from several countries starting August 1st. In the absence of trade agreements by this new deadline, these tariffs would be applied. In this context of uncertainty, significant volatility is expected in the ST market. We recommend traders to
hedge their transactions over time horizons from 1 month to 3 months.
EUR/USD outlook – BLOOMBERG
Brokers' EUR/USD forecasts were reviewed upwards on the LT this week. The pair is expected to reach 1.16 in Q3-25 and then 1.17 in Q4-25. It is expected to rise to 1.18 in Q1-26, reaching 1.19 in Q2-26, compared to 1.18 a week earlier. In 2026, it is expected to reach 1.20, compared to 1.19 initially. In 2027, the target level is 1.19, compared to 1.20 the previous week. In 2028, the target is 1.22, unchanged.
In the United States, inflation stood at 2.4% in May, below expectations of 2.5%. In the face of uncertainties related to the impact of tariffs, the Fed decided to maintain the Fed Funds rate in the range [4.25% - 4.50%] in June. After the July 9th deadline, new tariffs have been announced against a few countries starting August 1th. In the absence of new trade agreements, these tariffs are expected to take effect. In this uncertain environment, markets are anticipating a Fed rate cut of -25 BPS starting in September or October, followed by another rate cut of -25 BPS in December.
In the Eurozone, inflation stood at 2.0% in June, after 1.9% in May. Despite this slight increase, inflation remains in line with the ECB's 2% target. After the decision to cut the deposit facility rate by -25 BPS for the eighth time to 2.00% in June, the ECB is expected to decide a monetary pause in July in the face of uncertainties related to trade tensions. However, a final ECB rate cut in 2025 remains likely.
Downward review of our 1 month, 2 months and 3 months horizon forecasts
Given the EUR/USD exchange rate forecast and liquidity conditions in the foreign exchange market, we have reviewed our USD/MAD exchange rate forecasts downwards for the 1-month, 2-month, and 3-month horizons.
Brokers' EUR/USD exchange rate forecasts suggest a slight depreciation of the Euro against the Dollar over the 3-month horizon.
MAD liquidity spreads are expected to narrow very slightly relative to spot levels over the 1-month and 2-month horizons, and then narrow slightly again over the 3-month horizon.
Under these conditions, the target levels for the USD/MAD exchange rate are 9.05, 9.05, and 9.07 over the 1-month, 2 month, and 3-month horizons, compared to a spot rate of 9.01.
The target levels for the EUR/MAD exchange rate are 10.55; 10.55 and 10.57 at 1-month, 2-month and 3-month horizons against a spot level of 10.53.
