Global Themes

Halting the Trend

  • Dutch Elections resist Populist Pressure
  • Rate Hike Moderation 

Dutch Elections

Dutch Elections resist populist pressure
Geert Wilders, leader of the right-wing Freedom Party, has gained seats in parliament but Mark Rutte, the incumbent PM, rallies enough support to resist a populist win in the election.

Populist sentiment, which resulted in both the ‘out vote’ in the EU Referendum and election of Donald Trump as US President, has suffered a setback in the first EU election hurdle.  Mark Rutte, the incumbent Prime Minister, successfully garnered enough support to reject populist advances of Geert Wilders, who heads the right-wing Freedom party.  But while this outcome illustrates the greater commitment of the Dutch electorate to the EU project, Freedom Party placed second ahead of both the centrist D66 and Christian Democrats.  Forming a coalition where the support is so diffused may prove quite a challenge in coming weeks.

This turn of events sets the scene for the April 23rd French Election Primary where Marine Le Pen, leader of the National Front stands a very good chance.  Her rhetoric, while populist and nationalist, is more moderate than Geert Wilder’s anti-Islamist vitriol.  The EUR has experienced some support as result of the Dutch outcome but the next and perhaps greater challenge is just a month away. 


Rate hike seems the market had overbaked rate expectations in the US because last night Janet Yellen reinforced a moderate pace.

The resumption of the Fed tightening cycle re-emerged after a Trump victory had hinted at stronger spending than was priced under the more moderate Hilary camp.  Since then US fundamental factors, such as employment, have continued to improve while global inflation has also nudged higher.  Leading into yesterday’s FOMC meeting the expectation was correctly set at a 25bp increase in the rate but more importantly the pace of future hikes had risen too far.  Janet Yellen announced the increase in the base rate but reinforced the previous moderate pace, accounting for a total of three 25bps increases for 2017.  The US Dollar was sold off leading into the event and continues to trade softer.

In the last day President Trump released a first-salvo summary view of his first budget.  In it he defunds many US Government Agencies, like the EPA and Corp of Engineers, and Cabinet Departments – prominently Health and Human Services, USAID and Education – while bolstering Defense and National Security spending.  It is unclear at this stage what the net impact on consumers will be but this topic is key to the inflation picture the Fed will use to determine the pace of policy and therefore the Dollar.

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