Here they are:
Top Trade #1: Transatlantic economic divergences and political risks: Long US$ equally weighted against EUR and GBP, with a basket indexed to 100, a target of 110 and a stop at 95. Annual carry on this basket is 1.3%.
A building theme in global markets is the populist shift in politics, as evidenced by the Brexit vote in the UK and the recent US elections. In the US, events have moved in a USD-positive direction, between the rising likelihood of fiscal stimulus, more protectionism and immigration controls, all of which add up to a more inflationary mix and tighter-than-otherwise monetary policy setting. In Europe, ongoing uncertainty over the Brexit process will likely weigh on the Pound, while the slew of elections, including the Italian political fallout after the constitutional referendum on 4 December and general elections in France, Germany and the Netherlands, will weigh on the EUR (Exhibit 3).
The full text of this article is available to MacroBusiness subscribers
