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Western politics dominate the narrative this week – UBS

This week is full of politics, and markets are rarely good at pricing political risk, argues Paul Donovan, Chief Economist at UBS Global Wealth Management.

Markets focus on politics in the US and Europe

“The US presidential debate may cause investors to pay attention to political risk earlier than normal in the US political cycle. Because much of the attention has been focused on the candidates’ suitability for position (rather than his political positions), this debate could really matter.”

“Inflation is a real-world problem that has had political implications. Politically, inflation is an emotional issue, not a rational one: consumers focus on the price levels of high-frequency purchases. Reports of discounts on food and The retreat from profit-driven inflation is likely to impact political perceptions much more than official data.”

“The Prime Minister of the United Kingdom and the Leader of the Opposition will also debate this week. The markets do not believe that there is much political uncertainty in the United Kingdom. We conclude the week with the first round of the French parliamentary elections. The market uncertainties there “They are specific (who will form the next government in France?) and more general (the rise of bias politics in Europe).”

Source: Fx Street

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