November 12 2016

Nov. 12, 2016 (Commerzbank AG) – The European Trumps

Increasing numbers of people are turning against the political establishment, not only in the US but also in the EU. In Italy, the Five Star Movement could produce the next prime minister if the referendum on Senate reform on 4 December were to fail. In the Netherlands, Geert Wilders’ PVV is expected to emerge as the strongest party in the next post-election parliament. The advance of this anti-establishment movement is creating a climate in which politicians are less able to introduce reforms, and the ECB continues to clear up the mess on the monetary front.

Further topics:

US forecast: Is everything different after Trump’s victory?

During the election campaign, Donald Trump frequently advanced radical positions, particularly in relation to foreign trade. Do the economic and key interest rate forecasts for the US need to be adjusted following his election victory? A sober analysis reveals upside and downside risks. There is unlikely to be any rapid impact on the economy. We are therefore sticking to our forecasts for the time being.

Outlook for the week of 14 to 18 November 2016

  • Economic data: German GDP growth in Q3 is expected to post a quarterly rate of 0.2% versus the previous quarter, which would be the slowest rate since last year. In the US, the inflation rate is gradually approaching the 2% mark.
  • Bond market: Bond markets have shown a muted response to Trump’s election victory but there are upside risks for yields. We recommend keeping duration risks low for the time being.
  • FX market: The anticipated FX market turmoil did not materialise either. Currency markets are ignoring political uncertainty, initially focusing on fundamental issues, which suggests that USD sentiment is likely to remain positive for now.
  • Equity market: The DAX has robust valuation support during the current period of persistent political uncertainty with a fair DAX trading range between 10,000 and 11,500. But the rise of anti-establishment politics is a key mid-term headwind for equities.
  • Commodity market: Oil should move sideways until OPEC meets at the end of the month, as pressure mounts for supply cuts. Copper remains vulnerable to profit taking after the recent rapid rally. Although gold has not rallied it has medium-term potential to do so.


Nov. 10, 2016 (Tempus Inc.) – The U.S. Dollar is up against commodity-based currencies while staying relatively quiet against its major peers. Markets are acting in odds with what was predicted if Trump triumphed, but historically the business world prefers the prospect of Republicans who’ll likely come into power seeking less regulation and fomenting less intervention in the free market.

Trump’s trade, or rather anti-trade rhetoric, during his campaign has economists concerned, but thus far markets are rebounding, big league, after dropping for eight consecutive days. The greenback’s strength is due to data releases that satisfy the Fed’s requirements ahead of a gradual hike.

Jobless Claims were slightly lower than expected; helping to solidify the labor market’s strong run. Commodity prices are rising, stocks are thriving, and USD is appreciating. How long this will keep up is hard to tell, but the “buck” is holding steady for now. Populism succeeding is morphing how we gauge economic performance, so things could change quickly.


The Yen fell by over 5.2% in value since the U.S. election results showed Trump succeeding. The move was a surprise because Yen forecasters estimated the currency propelling as a safe-haven to a Trump win that would dismantle global markets. This didn’t happen.

Equities flourished and thus Yen declined as it usually does when risk-appetite grows. Japan’s economic situation is not great as deflationary pressures remain and wages remain stagnant, but experts foresee Yen rising by 17.0% by the end of Q1 2017 if Trump delivers on his message of upending globalization and outsourcing.


The Euro kept trending downward yesterday, losing ground in the midst of a shocking result in America and poor data out of the EU’s second largest economy. France produced some underwhelming figures as Industrial Production revealed contraction of 1.1% and payrolls grew at a measly 0.3% pace.

Now that the campaign in the U.S. is over, the spotlight may be on the Italian referendum coming in December in which the people will decide changes to the constitution and balance of power between executive and legislative branches. The political red-tape in Italy played a role in preventing much-needed bank and fiscal reform after the 2008 crisis negatively impacting the “old boot’s” ability to recover since then.