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From the Floor: Weak Wilders allows for risk-on mode — #SaxoStrats

• Dutch result means disruption of the populist narrative — Hardy
• French election risk is a bit more priced out now — Hardy
• Treasuries dip on dovish Fed hike — Fasdal
• June rate hike probability is now priced below 50% — Fasdal
• Fed is not in the driver's seat, but reacting to data and Trump — Hardy
• There is an increasing willingness to allow financial bubbles to exist — Garnry
• We have a red hot equity market — Garnry
• Oil extends strong recovery, so do gold and silver — Hansen

By Clemens Bomsdorf

Dutch populists in retreat and a US rate hike with a dovish statement were late Wednesday’s two events that should mean risk-on mode for markets today. Such reaction was already seen in Asia, reports Shiyun Su. Major Asian stock markets rose and the Hang Seng jumped to a three-week high. 

With Dutch right-wing politician Geert Wilder’s party only coming in second place and clearly behind the prime minister’s party, the election result was a disruption of the populist narrative, says John J Hardy, head of FX strategy at Saxo Bank

As such it should boost the euro. Hardy also says that the French election risk is increasingly priced out now. According to Hardy, it would be surprising to see EURUSD test and break the 1.05 to 1.08 channel before the French presidential election next month.

The Dutch election outcome will cause a major re-pricing of equities and bonds in Europe today, says Peter Garnry, Saxo's head of equity strategy. He stresses that European car sales up 2.1% year-on-year also indicate that the European economy is doing quite fine. The German Dax index is gaining ground towards its all-time high from early 2015, and we also see a very strong reaction in emerging markets making new highs priced in USD. 

 Source: Saxo Bank

All in all, there is now a little stronger feeling that the anti-establishment movement in continental Europe is not so powerful, summarises Saxo's fixed-income strategy chief Simon Fasdal.  

The second decisive factor now is, as already mentioned, the Fed. What we see is a classic risk-on reaction which usually takes place when rate expectations are lowered or the dollar weakens.

 AUD and EM currencies are doing well. But Hardy questions how durable the reactions will be. "After all the Fed is not in the driver seat, it is reacting to incoming data and Trump,” he says, adding that new policy moves from Trump could get markets to forget the FOMC meeting fast. Fasdal says the June rate hike probability is now seen below 50%.

The Fed despite the rate hike was more dovish than expected. Leaving its outlook unchanged hints at the Fed’s increasing willingness to allow financial bubbles to exist, according to Garnry. “We have red hot equity markets,” he says. Unless we get some weak macro, it is still a bull market.

USGGT10Y and gold (click to enlarge)
gold USgggt
Source: Bloomberg
Precious metals, which had been under pressure ahead of the US rate hike, recovered. It is almost becoming too easy, says Ole Hansen, Saxo's head of commodity strategy,
pointing at a chart showing gold and the US generic government 10-year index. Such reaction could be seen for the third time in a row now. 

Oil continues its strong recovery. “We need to break $53.4/barrel in Brent and $50.2/b in WTI to call it a rally,” Hansen says.
Mark Rutte
 Also today Dutch prime minister Mark Rutte has reasons to smile: 
He will probably keep his job. Photo: Shutterstock

Clemens Bomsdorf is consulting editor at

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios 


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