Political Risks in Europe, Trumpflation Trade – 16 Nov 2016

Political Risks in Europe, Trumpflation Trade – 16 Nov 2016


Asian markets continue to move higher, taking their lead from the European and U.S Stocks while the US dollar is getting a bit weaker. Market remains extremely bullish on inflation expectations despite that there is no economic events to support the reason behind accelerated inflation.

Expectations of more fiscal stimulus and less accommodative monetary policy by new US president gives a boost to inflation expectations and dollar.

We think that yesterday’s 5% skyrocket for oil prices is unstable and very optimistic as there are at the moment little evidences that show an agreement for reducing oil production between major global oil producers . Oil is one of the most sensitive products on news and insider information and that makes it very difficult and risky to trade.

As China and Saudi Arabia gave warnings to Trump, it is vital to see in what way the new president of the U.S will deal with China after the he advocated a strong stance against them. We should not forget the huge trade relations between US and China and the fact that China is the biggest holder of US debt.

Political uncertainty moves the Euro lower, market expect that the Trump’s victory will possibly be a tsunami that will drown the old political system and will spread nationalism within Europe. December 4th is a very important date as we got the Italian referendum and national elections in Austria where there is a high probability that the far right party may be elected.

Key points:
• Former BOJ executive director supports that BOJ is still too optimistic on inflation
• Brexit could be delayed for two years, Supreme Court judge warns
• ECB’s Villeroy: ECB making progress on inflation goal
• Italian PM Renzi Plans To Veto EU Budget
• The Dow has rallied for 7 days in a row, adding 5.8%
• Angela Merkel suggests she is willing to compromise on free movement in the wake of Brexit
• Renminbi trading at weakest level in 8 years ( 9 straight session of losses against USD)
• Angela Merkel to run for 4th term as Chancellor, politician says
• Crédit Agricole extends lease on London headquarters until 2025 despite Brexit vote

Daily Economic calendar:
Country Event Importance Previous Expectations Follow Times
UK Claimant Count Change High 0.7K 1.9K GBP 12:30
UK Average Earnings Index 3m/y High 2.3 2.3 GBP 12:30
USA PPI m/m Medium 0.3 0.3 USD 16:30
USA Industrial Production m/m Medium 0.1 0.2 USD 17:15
OIL Crude Oil Inventories Medium 2.4M 0.4M OIL 18:30

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