DEUTSCHE BANK: The dollar and the euro are all about politics

pulse

September 15, 2017 8:01 PM

"In a sentence, it's all about Trump winning in the US and Macron changing investor perceptions on Europe."

It looks like two of the world's most important currencies might be reacting to politics rather than economics.

The US dollar index has fallen by about 11% against a basket of its peers since US President Donald Trump's inauguration. It's now at its lowest level since January 2015.

The Deutsche Bank team's argument is interesting because, generally speaking, developed market currencies like the dollar or the euro respond to economic data and interest rate decisions. On the other hand, investors generally see emerging market currencies as being more susceptible to political events.

But after several high-intensity elections and votes, developed market currencies now appear to be sensitive to political events as well. In addition to the dollar and the euro, we've also seen the pound bounce around after political news over the last year-plus since the Brexit vote.

This trend might not be limited to currencies, however. In December, Bloomberg's Sid Verma reported that S&P Global Inc. said that key drivers of creditworthiness in developed markets — like the strength of institutions — can't be taken for granted anymore.

no longer be possible to separate advanced economies from emerging markets

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