Thursday, May 11, 2017

Political Risks Eased in Europe, Uncertainties Remain in the US

11 May 2017

Rates & FX View

Political Risks Eased in Europe, Uncertainties Remain in the US

¨      European election cycle: the French and Dutch rejected far-right parties and elected pro-European leaders. Political risks eased in Europe, underscoring an upgrade to neutral for the block’s currency.
¨      A disappointing 100-day Trump presidency compared to market expectations contributed to a broad USD underperformance YTD.
¨      Rising geopolitical tensions exacerbated by changing US international positions bolstered Safe Haven strong performances YTD: Government Bonds, Yen, Gold, and…a new heaven, Emerging Markets.
¨      So late in the cycle, can the economy strongly recover? What is the Fed room to manoeuvre?
¨      G3 Rates and FX: the USD consolidation is already in progress and we maintain lower than consensus rates forecasts.

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