European elections 2017

There are more political uncertainties in Europe this year, as you would be already aware of. Here are probably not all of them, but some remarkable events listed below:

15-March: Dutch general election
Netherlands picks up members of House of Representatives. Main focus would be how many seats are being held by Geert Wilders' Party for Freedom (PVV). Recent reports still say PVV is leading the poll, which currently have 12 seats out of 150 and is expected to obtain around 30 seats.
>> General election: Latest poll of polls shows slight drop in PVV support
>> Dutch polls

23-April and 7-May: French presidential election
Two rounds are held to for the election. Currently, the poll by Elabe for Les Echo predict that Emmanuel Macron wins by beating Marine Le Pen on the second round. Francois Fillon is facing Fake job scandal. Although the investigation is underway, it inevitably damage his supports for a while.
Global interests would be whether Ms.Le Pen beats another on the second round, who is leading National Front party known as a far right wing and EU sceptic party.
But now, the president is still Francois Hollande.
>> François Fillon faces 'elimination' from French presidential race as 'fake jobs' scandal intensifies

11-Sep: Norwegian parliamentary election
Since no radical party rise up in Norway which is not a member of EU, majority of global media have not followed the election. As seen in the poll, it indicates Labour Party (AP) which currently holds the largest number of seats would get advanced further. But the poll outcomes with no particular surprise.
>> NORWAY, January 2017. Sentio poll
>> New political alliances forming

24-Sep: German federal election
Some know Alternative für Deutschland (AfD) have got spot lights in 2016, as a consequence of the refugee crisis. However, the recent poll shows Ms.Merkel's CDU/CSU (Christian Democratic Union/Christian Social Union) coalition is still leading, followed by Social Democratic Party (SPD).
Although there are 7 months to go, German political order is unlikely to change too drastically.
>> Merkel’s Challenger Leads Social Democrats to German Poll Boost
>> POLLYTIX GERMAN ELECTION POLLING TREND

Some day in 2017?: Italian parliamentary election
The next parliamentary election is planed in 2018. But, after the referendum on December, Matteo Renzi resigned PM position, and both Democratic party and 5-Star movement are calling for the earlier election. 5-Star movement possibly takes majority of seats for the next election, which is known as anti-establishment and Eurosceptic.
>> Italy court verdict could pave way for early elections


There were many political events which probably shake the financial markets in 2017. But I would more concern that European economy will visibly stagnate this year. Maybe, it is better to publish on another post.

FX rate for last 10 years against USD 21-Dec-2014

As you know, Russian Ruble (RUB) has massively dropped in its value against other major currencies, particularly against USD,  since the Crimea issue and crude oil price plunged.

This RUB dropping is one of topics in the latest FX market, however other major currencies have been under the trend reversal for last ten years over the Lehman crisis.


1. Currencies down around 50% for last 10 years

< Figure I >

 The chart on the right describes the change rate of USD value per each currency value per since Dec 2004. RUB value has gone down to less than half of the value at 2004, and South African Rand (ZAR) value has also dropped around half of the value at 2004.



2. Brazilian real

< Figure II >

BRLUSD have changed only 1.1% from 2004, but the current value has gone down 42% from maximum value in last 10 years. BRLUSD at Dec 2011 was around 0.5358 and BRLUSD at Dec 2014 is around 0.3743.

If you bought 3yr BRL bond for BRL 2M at Dec 2011, the equivalent value in USD is

 (Issue at Dec 2011) 1,071,600 [USD]
 (Redemption at Dec 2014) 748,600 [USD].

It means you would lose 323,000 [USD] from this investment. BRL is a non-deliverable currency, and it could be settled in USD. Even if the interest rate in BRL is as high as 5.0%, the capital loss could not be covered.


3. Trend reversal within last 3 years
Another remarkable trend reversal after the Lehman crisis could be observed in JPY and AUD whose values have been downward trend since 2012 - 2013. Those currencies are considered relatively stronger after the Lehman crisis but the trend has reversed around that time.

< Figure III >

JPY has dropped against major currencies since the Japanese election on Dec 2012 and quantitative easing with the new administration. Australian interest rate has cut from 4.25% (Jan 2012) to 2.50% (Aug 2013) record low level, and AUD has turned into downward trend for that time and after. JPYUSD and AUDUSD have changed -34% and -17% respectively for last 3 years only though -14% and +4.7% for last 10 years.


4. General comments
AUD, CAD, SEK, NOK and RUB, which are considered sensitive to the oil price, have gone down later 2014 due to the crude oil price down.

< Figure IV >

GBP, NZD and CHF have been on flattened trend relatively since 2011 while other currencies have started dropping against USD.

< Figure V >

For earlier 2015, the crude oil price is one of the biggest factors leading financial trend. RUB is the most sensitive currency at the moment. If those were going to out of control, emerging market could collapse and even the developed markets could be in crisis like domino.


Related posts)
Stock Market Risk: Correlation and Triple top 26-Nov-2014
Crude Oil vs Stock market in correlation 1-Dec-2014