We believe that the political tensions in Europe have diminished to very low levels; With the French elections now behind us (Emmanuel Macron has managed to win the elections and  forming a large majority government), the Italian political elections will most likely be postponed to early 2018 (the center right coalition is in rebuilding mode and  the 5 star movement is in the loss of consensus ) and last but not least a nearly secure re-election of Chancellor Merkel has brought some calm and serenity to the European financial markets.

Markets therefore expected the European Central Bank’s tightening the ultra-expansive rate policy but this has not been the case for the moment in fact the ECB chairman stated that for the time being the conditions for a radical change in the rate policy is still not given, in particular, the forecasts for European inflation has been lowered.

However, we believe that the single European currency could possibly strength, albeit only momentary and not overwhelmingly against USD and CHF in particular due to a greater demand for equity investments in European stocks. American political uncertainties directly involving President Trump are another factor of weakness for the US dollar.

European economic fundamentals are growing and we believe it is interesting to invest in cyclical equities of companies with sales mainly in the eurozone.

The US Stock Exchange could also gain further ground, especially financial securities may benefit from a relaxation of the tight rules adopted after the 2008 financial crisis, Trump’s administration may undo or alleviate many rules without necessarily getting the green light from the congress.

The Fed recently raised the interest rate by 0.25%, we believe that normalization of US rates will continue and, depending on the evolution of US macroeconomic data, we could see 2 further increases during the current year.

Another factor not to be underestimated will be the downsizing of the FED balancesheet, recent voice interventions by various local central bank governors support the beginning of this normalization. If this happens in a relatively short time as an effect, we will have a rise in US real nominal rates that will help the US dollar to resume its strength.