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Euro May Decline as Greek Exit Polls Show Syriza Set for Victory
The euro may open lower after exit polls in Greece showed the anti-austerity party, Syriza, was set for a decisive victory in the nation’s general election.
The 19-nation shared currency already dropped to its weakest level in more than 11 years against the dollar on Jan. 23, tumbling after the European Central Bank announced it would pump 1.1 trillion euros ($1.2 trillion) into the economy to revive inflation. It may extend losses because a victory for Syriza leader Alexis Tsipras raises the prospect of an unprecedented exit from the currency bloc, according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Asset Management in Menomonee Falls, Wisconsin.
Syriza is set to win the parliamentary elections with a 35.5 percent to 39.5 percent share of the vote, according to an exit poll on state-run Nerit TV. The projected result may be enough for the party to govern without a coalition partner.
“If Syriza indeed gets more than a third of the votes, it can get a majority in the Greek parliament without needing to form a coalition government,” Jacobsen said by e-mail. “This will likely continue pushing the euro lower on the remote possibility of Grexit.”
The euro was at $1.1204 at the close in New York on Jan. 23 after earlier touching $1.1115, the lowest level since September 2003. It plunged 3.1 percent last week, its sixth consecutive weekly loss.
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Greek Exit Polls Suggest Blowout Victory For Syriza
UPDATE: Greek Government official admits electoral defeat by Syriza
As AP reports,
Syriza Heads for Victory, Greece into the Unknown
Greek electoral official Michael Cariotoglou released the first official projections on Sunday night. Syriza, leftist anti-bailout and anti-austerity party, has secured a clear victory in Greece's parliamentary elections. The party is projected to have won 36.5% of the vote, giving it 149-151 seats in the 300-member parliament.
Cariotoglou warned that there was still a margin of error that could lead to changes in a few seats. "We might need to wait until all votes are counted," he said.
The far-right Golden Dawn and centrist To Potami (The River) came third in both exit polls with a similar level of voter support.
It is still unclear, though, whether Syriza will receive enough votes to form a government on its own.
“It’s hard to predict at this point what will happen in the next few weeks. Those abroad are expecting an about-face. Those at home believe that those abroad will give in,” Alexis Papachelas, executive editor of Greek Kathimerini daily, said about a possible Syriza government. "A compromise would be the sensible thing. But logic is not always the driving and determinant force of history. Quite the contrary."
A total of 9,808,760 people were eligible to vote in Sunday's general election, with women making up the majority (5,060,877).
Mandate to renegotiate debt
"The vicious circle of austerity is over", Syriza leader Alexist Tsipras declared after casting his vote on Sunday morning.
Earlier, in a televised news conference on Friday, he suggested that if elected, his government would enter negotiations with eurozone partners and would aim to conclude talks between the two sides by July or August, when Greece has a series of debt obligations to meet, almost €10 billion in total of debt repayments.
Tsipras said that he envisions achieving a “sustainable, mutually acceptable solution for Greece and for Europe.” He also suggested that he would prefer to negotiate with officials from European Union institutions rather than those from the Troika (European Union, European Central Bank and the International Monetary Fund).
“Austerity is not enshrined in European treaties,” said Tsipras, adding that his government would recognize Greece’s “institutional obligations” toward the EU, but not the “political commitments” made by the outgoing government.
"Our party's mandate is to renegotiate," said a member of the Syriza economic team Yanis Varoufakis, who is seen by some as the top candidate for the post of new finance minister. Varoufakis has worked as an economics professor at the University of Texas in the US and argued that there is no way Greece could handle its massive debt.
"Greece went bankrupt in 2010 and what did Europe do in its infinite wisdom?" Varoufiakis skas. "It tried to deal with a solvency problem by extending the largest loan in history on the weak shoulders of the bankrupted Greek state."
Outgoing Samaras's government was able to achieve some progress and enact reforms demanded by the Troika. According to Q3 2014 data, Greece had a primary budget surplus and net interest payments. However, fundamental economic problems remain, ranging from inefficient industries, deep-seated corruption and powerful lobbies, to widespread tax evasion.
The Syriza leadership is calling for a six-month "truce" with the rescue program being put on hold while debt negotiations with international creditors begin. Considering the likely resistance from the rest of Europe and the International Monetary Fund, it remains to be seen whether one of the parties gives in, or some compromise can be reached. Or - Greece is pushed along a untraveled road: exit from the euro zone, if no agreement is reached.
Raw macroeconomic data
- Unemployment: 25.8% in October 2014, youth unemployment 50.6%
- Economy lost 25% since the start of the euro zone crisis
- Greece's government debt (Eurostat data) at the end of 3Q 2014: 176% of GDP, €240bn borrowed from the Troika (EU,ECB,IMF), total debt estimate up to $350 billion (owed also to other European governments, and private investors)
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EUR/USD: Euro Remains in Green After Solid Ifo Data
The euro managed to erase all its intraday losses, when it jumped from $1.11 to its intraday high around $1.1250. The shared currency was trading 0.23% higher at $1.1230 after Germany released its Ifo business indices.
The Current Assessment Index rose to 111.7 from last month's 110.0, the Business Climate Index climbed higher from December's 105.5 to 106.7 and the most important index, the Ifo Expectations Index, ticked higher to 102.0 after the previous reading of 101.1.
Germany is still performing pretty well compared to other European countries, but one single country won't be enough to pull the whole euro zone out of its misery and back into economic growth.
The market is very nervous after last week's decision of the European Central Bank, which initialed full scale QE, and Sunday's Greek elections, which are weighing negatively on the currency as well. The focus now shifts to Wednesday's Federal Open Market Committee (FOMC) meeting, which will be a very critical moment for dollar bulls as long positioning is very overstretched right now.
The FOMC is expected to keep its slightly hawkish jargon, although there is some speculation that policymakers might start to hint at some delay of the first rate hike, due to declining inflation and weak wage growth. Monetary easing from other major central banks is putting a huge pressure on the Federal Reserve (Fed) as the dollar strengthens and the inflation slows down further.
Any hint of the Fed delaying the first rate hike could start a massive short covering of the USD longs and the greenback will be heading for trouble. Before then, the main focus remains on the euro and its fundamentals, which are expected to undermine the shared currency further.
"The risk scenario for the USD is that the Fed sounds more cautious, noting external risks, emphasizing concerns about falling headline inflation, and perhaps even noting the impact of the stronger USD on prices and exports. However, while such concerns may find their way into the minutes to be released in mid-February, our economists do not expect this to appear in the statement. There is no press conference at this meeting. We remain bullish on the USD and would look to build upside exposure in USDJPY and USDCHF," analysts at BNP Paribas emphasized on Monday.
Technical analysis
The EUR/USD free fall continues after a short lived correction as the cross broke below the big psychological area of $1.1500. Technical oscillators are hugely oversold as the downtrend persists without any sign of a correction.
Support for intraday traders could be found at the $1.11 area which was tested previously on Friday and resistance seen at $1.13.
The gap down opening on the currency cross is very likely a so called exhaustion gap which will reverse prices because of the massive oversold conditions.
In this circumstances, it will be just a correction to the persisting downtrend and spikes toward the $1.15-16 area should offer a short selling opportunity.
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EURUSD initially fell during the course of the session on Friday, breaking below the 1.11 handle. However, we ended up finding enough buyers down there to turn things back up but still closing well in the red. A retracement could offer us a selling opportunity at higher levels such as the 1.1460 level.
EUR/USD holds gains as markets digest Greek vote
The euro held gains against the U.S. dollar on Monday, as markets digested news anti-austerity Syriza party swept to victory in elections in Greece, although concerns over the country's future in the euro zone still weighed.
EUR/USD hit 1.1374 during European afternoon trade, the session high; the pair subsequently consolidated at 1.1243, gaining 0.35%.
The pair was likely to find support at 1.1112, Friday's low and an 11-year low and resistance at 1.1374, Friday's high.
The single currency dropped to fresh 11-year lows against the dollar earlier, amid concerns over Syriza’s pledge to renegotiate the terms of Greece's €240 billion international bailout and reverse many of the austerity measures imposed by the European Union and International Monetary Fund.
The euro also remained under pressure after the European Central Bank unveiled a €1.2 trillion asset purchase program last week, aimed at combatting slowing growth and inflation in the euro area.
Earlier Monday, data showed that German business confidence improved to the highest level in six months in January, easing concerns over the health of the euro zone's largest economy.
The German research institute, Ifo said its Business Climate Index rose to 106.7 this month, above forecasts for 106.3 and up from a reading of 105.5 in December.
The euro was also higher against the pound, with EUR/GBP adding 0.23% to 0.7488, off Friday's seven-year lows of 0.7401.
I don't think the correction will last long the volatility are not strong. price will lose momentum quickly and continue the bearish trend
After known the victory of the anti-austerity Greek party, Syriza, the EURUSD has been with the support zone of 1.1122 (S1), determined by the minimum of September 17, 2003.
The short-term trend remains downward.
However, knowing that the fall from Thursday was too great, and that the European indices have been very positive is important to anticipate a corrective upward movement before the EUR go his way.
R3 - 1.15189
R2 - 1.14069
R1 - 1.13206
Daily Std. Pivot - 1.12086
S1 - 1.11223
S2 - 1.09240
S3 - 1.09240
EURUSD rose during the course of yesterday after initially gapping lower. This shows that the market already price in the Greek elections and that the pair more than likely is going to retest the 1.1460 level that was a previous support that now turned into resistance.
Germany Expects Bigger Growth in 2015 Than Thought
Berlin expects the European powerhouse to expand just 1.5% this year and by 1.6% in 2016, two senior government sources told Reuters on Tuesday.
That's basically the same pace of growth as seen in 2014, as the preliminary figures also showed a 1.5% expansion in the gross domestic product (GDP).
However, it's higher than the originally forecast 1.3% upturn for 2015, as outlined in the October projection.
Before the final round of consultations, a source told Reuters on Monday that Berlin was expecting growth of around 1.5% this year and next.
The projection is expected to be officially published on Wednesday.
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