Source: Bloomberg

A month ago the Trump Administration looked unstoppable while Angela Merkel’s Christian Democratic Union was at risk of losing next September elections to a bland Social-Democratic challenger with no political baggage.

Sunday’s regional election in the small German state of Saarland taught German commentators to ignore the polls and bet on the strong horse, namely Chancellor Merkel, whose party crushed the opposition with a much higher reading than the polls suggested, and a much better showing than in the previous election. That and the defeat of Dutch anti-immigration candidate Geert Wilders in his country’s April 15 elections made European populism look like a paper tiger.

Trump meanwhile came away from the health care debacle looking weaker. All this is reflected in currency parities: The risk premium on the euro shrank the moment the Saarland results came in, and the euro jumped against the yen, as shown in the scatter graph.