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26 Jan 2015
Greek election euro volatility not a surprise – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale, comments on the Greek election results, noting that the bounce seen in euro after it hit fresh lows due to Syriza’s victory isn’t surprising given the large fall in recent weeks and the growing short positioning for the single currency.
Key Quotes
“With 36.2% of the vote and a projection of 149 seats (2 short of absolute majority), Alexis Tsipras' Syriza party is on a strong position to form a new Greek Government by the middle of this week. In his comments since the vote, he has sounded anything but conciliatory in his approach to the Troika and to Greece's European partners. The vote is a mandate for re-negotiation on debt and a plea for an end to austerity.”
“It is not, of course, a surprise. The result is in line with opinion polls and the Euro has fallen a very long way in recent weeks, in the face of a large and growing short position in the market. No surprise then, that having made a new low in Asia overnight, we have seen a modest bounce in EUR/USD. It isn't a big enough bounce however to answer any questions about how fast the fall in EUR/UDSD towards parity can be, given the lopsided positioning.”
“With Mr Tsipras sounding so belligerent, market will ponder what ‘Grexit' would do for European assets (unambiguously bad for the Euro) and what concessions on Greek debt would do to other highly indebted economies.”
“The Euro/USD rate isn't the only indicator of markets being relative calm, as peripheral bond spreads have rise, but only marginally. I guess the Bono/Bund spread can't see much downside and spike would trigger renewed Euro weakness.”
Key Quotes
“With 36.2% of the vote and a projection of 149 seats (2 short of absolute majority), Alexis Tsipras' Syriza party is on a strong position to form a new Greek Government by the middle of this week. In his comments since the vote, he has sounded anything but conciliatory in his approach to the Troika and to Greece's European partners. The vote is a mandate for re-negotiation on debt and a plea for an end to austerity.”
“It is not, of course, a surprise. The result is in line with opinion polls and the Euro has fallen a very long way in recent weeks, in the face of a large and growing short position in the market. No surprise then, that having made a new low in Asia overnight, we have seen a modest bounce in EUR/USD. It isn't a big enough bounce however to answer any questions about how fast the fall in EUR/UDSD towards parity can be, given the lopsided positioning.”
“With Mr Tsipras sounding so belligerent, market will ponder what ‘Grexit' would do for European assets (unambiguously bad for the Euro) and what concessions on Greek debt would do to other highly indebted economies.”
“The Euro/USD rate isn't the only indicator of markets being relative calm, as peripheral bond spreads have rise, but only marginally. I guess the Bono/Bund spread can't see much downside and spike would trigger renewed Euro weakness.”