SocGen: "If Anyone Thought That Populism Isn't A Threat To EU, Today's Vote Is A Wake-up Call"

Earlier today, we said that as more sellside commentary on today's startling German election result came out, the knives would be out for the Euro. Sure enough, that's precisely what happened, and nobody captures the sour mood better than SocGen's FX strategist Kit Juckes who writes that "if the election of President Macron suggested to anyone that populism isn't a threat to EU, then today's vote is a wake-up call."

Selected excerpts from his note "European Trouble"

The CDU and CSU will be comfortably the biggest party bloc in the Bundestag when the final count comes in after Germany's election, but Chancellor Merkel is going to have to conjure up a collation with the FDP and the Greens, as well as facing the arrival in the Bundestag of the far-right AFD. If the election of President Macron suggested to anyone that populism isn't a threat to EU, then today's vote is a wake-up call, even if in practise, despite the difficulty of forming a coalition government, relatively little may change. 


We'll write (much) more about the implications for German and European politics when the final result is in. For now, the market reaction is to sell the euro, but only modestly. As I wrote last week, it's now or never for a EUR/USD correction. The euro has done better than shifts in relative interest rates, short or long-term, nominal or real, can justify. EUR/USD 1.17 is a natural chart target and may well be tested in the weeks ahead. A strong IFO would help the euro and the market has already embraced the idea both of a smooth start to the Fed's balance sheet normalisation, and a December Fed rate hike. But those are reasons to expect a modest euro pull-back, not to look for one to be avoided completely. EUR/SEK, EURNOK and EUR/PLN shorts, meanwhile, all of which we have written about in recent weeks, still appeal.


That said, there isn't an awful lot to get me too excited about the dollar here. US TIPS yields have moved yup, but drifted back down on Friday, and are back below 40bp. Then recent pattern of real yield moves is down in Japan (stay long USD/JPY and CAD/JPY)., up a bit in the US and Germany (meh!), flat after the recent rise in the UK (trouble brewing for sterling) and supportive of both CAD and AUD.


Meanwhile, as SocGen expect storm clouds for the Euro, here is Goldman doing what it does best, "explaining" how yet one more material and key development will have no impact or significance whatsoever.

Exit polls reported by the German media show the victory for the Christian Democrats (CDU/CSU) party of Angela Merkel arriving in the first position with a 13pp lead over the Social Democrats (SPD) party. In line with expectations, only two possible coalitions – benefiting from a large parliamentary majority – can be envisaged: either (a) a continuation of the current 'Grand coalition' with the Social Democrats (SPD); or (b) a 'Jamaica coalition' in collaboration with the Liberal Party (FDP) and the Green Party (Die Grüne).


We do not expect these electoral results to have a significant impact on markets from tomorrow as the victory of Ms. Merkel was largely anticipated and time is required to form a new government.

Actually, that's dead wrong, but what difference does it make at this point. We look forward to finding out which of these two explanations will be proven right in the coming days.


giovanni_f TeamDepends Mon, 09/25/2017 - 04:32 Permalink

"Populism" is the "Russia-is-behind-it" without Russians. When an election doesn't turn out as desired or people make use of their rights the whole result is declared morally invalid "because Populism was involed".Germany's AfD had no figureheads that make people vote. The party is successfully but wrongly dsplayed as a bunch af Nazis by the US-sponsored media (just read how the German media landscape was designed by the US occupiers post-war). If the AfD had had a charismatic populist leader it would have won easily 20%. Many AfD members are former CDU/CSU members. I suppose they've become all full-fledged Nazis the moment they switched sides.Another crap article from the pseudo-liberal banker lobby.

In reply to by TeamDepends

yvhmer giovanni_f Mon, 09/25/2017 - 06:26 Permalink

Populism is a mode of political communication that is based on contrasts between the "common man" or "the people" and a real or imagined group of "privileged elites", traditionally scapegoating or making a folk devil of the latter. It is something as old as humankind. So, who are the ones scared of it? Those who stand to lose the most: the ones on pluche, the ones owning the status quo. Who are using the term in a denigrating way? You guessed it. Popcorn is a good investment, it seems .... Cheers

In reply to by giovanni_f

hooligan2009 Sun, 09/24/2017 - 22:08 Permalink

"populism" exists already in the guise of failed libtard socialism - right across europe."populism" has failed - a new paradigm is emerging which is growing in popularity - it is not populism, it is common sense and involved a feeling that money is being stolen from tax payers for no good purpose, simply to serve the status quo of a bloated public sector making promises that cannot be kept.the status quo (including banksters) simply does not get it - the status quo is changing and it does ot include fiscal deficits, central banks or welfare fraudsters working for banks.come up with a new term for the "winds of change" sweeping through the world."populism" has been in place for 50 years AND IT HAS FAILED. 

ArthurDaley-Ol… hooligan2009 Sun, 09/24/2017 - 23:47 Permalink

Catalonia is populism, people are fed up of  being shafted. Global Trumpism is the flyover states getting shafted by HRC. Bill Clinton said to the folks in the flyover states that they'd bring new jobs in. What happened with Obozo ? They shut the mining pits down in Appalachia. This time around HRC said you're getting new jobs for the old mining jobs. You're gonna make solar panels. The folks in the flyover states didn't buy the BS she was selling.Emanuel MaCron (as Trump would call him) doesn't get it. They are importing rapefugees from North Africa and settling them in out of the way places that don't have jobs for them. The locals then build 7foot high brick walls around these facilities and Paris wonders why the natves are restless? DUH! We've had Brexit! People aren't buying the IYIC BS (IYIC= Intellectual Yet Idiot Class) rethoric forever. The Sheeple are starting to wise up. Too bad Mario Rajoy missed the Memo on the Spanish civil war memo..

In reply to by hooligan2009

Yen Cross Sun, 09/24/2017 - 22:12 Permalink

  What exactly is "populism"?    How exactly, is "populism" a noun?  It reads a-lot more like an adjective.  Is populism an person, place, or thing? It's certainly not a verb. 

Not Too Important Sun, 09/24/2017 - 22:22 Permalink

Germany, and the EU, is finished. It is already well past the point of no return to becoming a third-world shithole. The invaders are not capable of maintaing modern European infrastructure, so back to the Dark Ages it goes.Hopefully, the AfD will not allow the government to bury any reporting of the EU's Islamification as hate speech, so we can all watch the end of European Western Civilization in real time. 

Bunga Bunga Sun, 09/24/2017 - 22:29 Permalink

That Merkel ordered to let millions of undocumented migrants to enter Germany was in violation of German law. That thousands of criminal migrants are not expelled from the country but can continue to live on welfare is against the law. That parents do not let their children leaving the house alone, because they fear that they become victims of theft, robbery and rape shows that the government is unwilling or unable to protect its own citizen. The "populists" are simply demanding to reinstate law and order.

old_cynic Sun, 09/24/2017 - 23:23 Permalink

Populism isn't the threat, but increasing political control over the people is the grand plan. People everywhere are recognizing that ISLAM is a threat.The various government leaders around the world have been PURPOSELY importing the ISLAMIC threat to so many countries.  It's almost as if the dear leaders WANT to have civil unrest so they can stomp it out with military/police FORCE against the population.   

Internet-is-Beast Mon, 09/25/2017 - 02:19 Permalink

There never has been proper vetting of migrants in any European country. It would seem that by admitting hundreds of thousands of them, they overwhelmed any capacity for proper vetting. People who cannot be vetted, such as people who threw away their papers, should not be given asylum. People who are granted asylum should be rigorously watched and monitored. Any crimes committed on their part should lead to immediate expulsion. Economic migrants should be turned away unless they meet traditional standards such as bringing needed skills.

Other than legitmate asylum seekers, as traditionally defined by law, no immigrants should be given state aid.

What we have, instead, is a war on European soil. A war in which one side is fully concious of waging war and the other side believes in political correctness. This can only have one result, as Merkel well knows.

IAmNumberSix Mon, 09/25/2017 - 07:03 Permalink

Interesting how the left has always connected nazism to nationalism. They knew that globslism and nationalism could not coexist so they ran an Alinsky labeling campaign against nationalism. The founding fathers of the USA were nationalists. Nationalism is the only thing that will save Europe.