Intraday Market Thoughts

Euro Below 1.11 after Greek Elections

by Adam Button
Jan 26, 2015 0:46

Greek anti-austerity party Syriza won a decisive election victory and may hold a parliamentary majority. The stronger-than-expected result sent the euro a half cent lower in early Asia-Pacific trading. Japanese trade balance is due later and Australia is on holiday. The 2 AUDUSD Premium sh0rt trades from mid December have hit their final targets for 210 and 230 pips.

Syriza will win 149-151 seats in the 300 seat parliament, according to the Interior Ministry. It may take another 6-8 hours to see if they have achieved the 150 seat threshold but either way, they will have a strong mandate based on rejecting bailouts and austerity.

In his victory speech, Syriza leader Alex Tsipras didn't soften his rhetoric and he said the Troika era is over. The euro was down 48 pips to 1.1156 in early trading and EUR/JPY down 82 pips to 131.12.

Even if Syriza is able to form a slim majority, they may look to form a coalition to strengthen their hold on power. The most-likely partner appears to be the Communists and they openly favor a Eurozone exit. Headline risk in the remainder of the week will be paramount as the balance of power is decided.

Other key weekend news included a renewal of aggression in Ukraine with pro-Russia forces launching an assault on the key port of Mariupol in the deadliest move in months.

At the ECB, the Bundesbank remained defiant with Weidmann saying he has doubts QE will be effective. Overall, however, his comments didn't signal open hostility and that's slightly dovish for the euro because it shows the Germans aren't willing to risk any kind of scorched earth policy to avoid QE.

Looking ahead, Japanese trade balance is due at 2350 GMT and expected to show a healthy 11.2% y/y rise in exports and a 2.0% rise in imports. The minutes of the Dec 19 BOJ meeting are also due.

Act Exp Prev GMT
Merchandise Trade Balance Total (DEC)
¥-660.7B ¥-740.3B ¥-891.9B Jan 25 23:50
Adjusted Merchandise Trade Balance (DEC)
¥-712.067B ¥-925.010 Jan 25 23:50
Merchandise Trade Exports (DEC) (y/y)
12.9% 11.2% 4.9% Jan 25 23:50
Imports (DEC) (y/y)
1.9% 2.3% -1.7% Jan 25 23:50

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