Europe: Anti-establishment fears rising - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the anti-establishment trend in global politics has become a bigger influence on financial markets with the Trump victory building on the Brexit vote and leaving investors with a heightened fear that the Italian PM Renzi will fail in his attempt to consolidate power with a referendum on constitutional reform set for 4 December. 

Key Quotes

“The reform proposed by Renzi is designed to make it easier for his government to pass legislation by reducing the power of the Senate, and he has threatened to resign if it fails to pass.  Anti-EU populist parties oppose the reform.  Looking ahead the market is also seeing risks to cohesion in the Eurozone from elections in Germany, France, and the Netherlands next year.”

“Such considerations may be weighing on the EUR.  Although it is difficult as always to disentangle how the EUR should trade in these circumstances.  Does the value of the EUR look harder or softer? Does it respond positively of negative to homegrown risks?  Certainly, EUR/CHF has weakened.”

“On the other hand, with anti-establishment forces appearing more widespread, the retreat from the EU by Britain no longer appears such a special case; trade deals globally appear under threat as more Western developed countries turn away from globalization.  As such, the GBP has recovered some of its lost ground in recent weeks. Since the Trump victory, it is the only currency to gain against the USD.”