Citi Sets Bullish 2026 Target for STOXX 600 as Fiscal Support and Monetary Easing Boost Outlook 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
US Gas Market Poised for Supercycle: Bernstein Analysts 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
Moldova Criticizes Russia Amid Transdniestria Energy Crisis 
Morgan Stanley Boosts Nvidia and Broadcom Targets as AI Demand Surges 
Urban studies: Doing research when every city is different 
Airline Loyalty Programs Face New Uncertainty as Visa–Mastercard Fee Settlement Evolves 
Stock Futures Dip as Investors Await Key Payrolls Data 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
It seems that regional politics would imply a weaker euro, the forecast for EURUSD is unchanged with a decline to 1.04 in Q1’end on regional political risks (greater in H1 due to the French elections) and optimism on Trump’s policies, followed by a near-10% strengthening later in the year on ECB tapering (Q2 1.06, Q3 1.08 and Q4 1.15).
Euro area politics continue to be in focus with a Le Pen Presidency in the French elections the main concern, for now, the casualty has been the bond market in conjunction with the FX markets. While French-German yield spreads have widened nearly 20bp YTD to a 3.5-year high, there remains little evidence of political risk priced into the currency with the TWI 0.5% stronger. A key development in the past month has been a decline in Fillon’s support in polls which has benefitted Macron on margin. There could be three distinctive scenarios out of this political turbulence.
Scenarios 1: An umbrella of scenarios perceived as benign, where Hamon and Melenchon do not present a unified radical left candidacy, the judiciary and public opinion pressure on Fillon abate and either 1) both Macron and Fillon qualify, or 2) either Le Pen or the left wing candidate gather less than 30% of the vote to face either Macron or Fillon.
Scenario 2: A scenario of moderate market stress with either Le Pen or a unified left candidate achieving a 30%+ score, vs either Macron or Fillon (or the “Republicans” candidate called in replacement).
Scenario 3: The acute market stress in a confrontation between Le Pen and a Hamon/Melenchon coalition. Regardless of the probabilities of occurrence of each scenario, we make simple arbitrary assumptions for each scenario in terms of market impact in order to rank the efficiency of vanilla EURUSD hedges:
Scenarios 1: Is associated with moderate relief in EURUSD spot (+2% to 1.08 back to year highs) and vols (down -1vol in the parallel shift). Some token risk premium would remain awaiting the result of the second round, but the risk of a Le Pen or leftist presidency would be perceived as low.
Scenario 2: EURUSD down 4% to 1.02, and vols up +2vols. A surprisingly strong momentum in favor of a populist candidate would spook investors, but the base view would remain that the mainstream candidate would prevail in the second round.
Scenario 3: EURUSD down 8% to 0.97, vols +4, after possibly larger overshoots. Significant portfolio outflows would be expected in such event.
