Exhibit 72: Trade-Weighted US Dollar Index Exhibit 73: Eurozone Net Portfolio Flows The recent dollar rally implies much of the good news has Policy divergences could continue to drive portfolio already been priced in. investment out of the Eurozone. January 1997 = 100 12-Month Rolling Sum, % of GDP 140 5 6 4 fe Into Eurozone 130 = Euro Appreciation 120 ; ATA All 110 =v Mg aff Capital Out of Eurozone = Euro Depreciation 90 + 5 MEME Net Equity | | Net Debt ——— Net Portfolio Flows 95 2000 ; 2005 ‘2010 2015 $ 2011 2012 2013 2014 2015 2016 Data through December 31, 2016. Data through October 31, 2016. Note: Shaded areas denote periods of US recession. Note: 03 2016 data used to calculate 04 2016 share of GDP. Source: Investment Strategy Group, Datastream. Source: Investment Strategy Group, Haver Analytics. partly reflected in current exchange rates, the US the ECB just extended quantitative easing until dollar is vulnerable to both domestic and foreign December 2017. disappointments. We expect these transatlantic policy divergences In sum, we expect the dollar to appreciate to persist, driving European investors to continue further, but at a slower pace and with greater seeking higher-yielding, non-euro-denominated volatility than in recent years. assets abroad (see Exhibit 73). This preference will likely be bolstered by uncertainty surrounding Euro upcoming national elections in Germany, France, The euro was on the losing side of the US the Netherlands and possibly Italy and Spain. dollar’s strength again in 2016, marking the third While our central case assumes mainstream parties consecutive year of underperformance and the prevail, any result that raises questions about the longest stretch of annual declines since 2001. Last —_ long-term viability of the European Monetary year’s modest 3.2% decline actually masked a Union could push the euro even lower. much larger 10% drop from the euro’s intra-year Still, we should not lose sight of the fact that peak, half of whi