New Democracy, same problems

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The end of the world has been put on hold as a result of the Greek elections, with very little price action so far this morning. As we thought last week, the results followed a very similar pattern to that of the first elections with the conservative New Democracy party taking the win and with Syriza, the anti-bailout party, coming in second.

The onus is now on ND to try and form a coalition government with PASOK the likely first favourite although the leftists are reported to have said they would not be involved in a coalition unless Syriza were too involved, but Syriza want nothing to do with ND. Such is politics however, this is what markets were really expecting from the weekend.

Some people this morning are talking about the Eurozone now rewarding Greece by the cutting interest rates on some of the bailout or extending the time period over which the money is to be repaid. We think this is unlikely until a new government is formed and that remains a big if at the moment.

EUR-USD opened higher on the news but has been subdued for a large part of the Asian session while equities have pushed higher. There is very little reason out there why any rally from the Greek election will not be faded by investors who still have very real concerns about the state of the European economy in particular the larger countries within the periphery such as Italy and Spain. The light of inquisition will likely be shining back on them by the middle part of the week.

GBP-USD has also popped higher this morning on the general risk flows while GBPEUR is lower. Risk is winning at the moment over havens.

While negotiations will be on-going in Athens, the G20 are due to start meeting in Los Cabos, Mexico for a two-day summit where the wider European crisis will dominate. As with all these meetings and bi-lateral talks the proof will be in the pudding; whether some form of substantive policy results or whether we get another toothless communique pledging vigilance and the commitment to act if necessary.

Other signposts on the horizon through the week include the Fed’s latest meeting on Wednesday, UK inflation tomorrow and a fair few European bond auctions as well. While the beginning of the week may have been quieter than expected the odds are long that it will remain so.

Indicative Rates Sell Buy
GBPEUR 1.2343 1.2370
GBPUSD 1.5679 1.5704
EURUSD 1.2691 1.2712
GBPJPY 124.22 124.48
GBPAUD 1.5511 1.5538
GBPNZD 1.9760 1.9787
GBPCAD 1.5998 1.6028
NZDUSD 0.7925 0.7945
GBPZAR 12.93 12.98
USDZAR 8.2366 8.2847
GBPPLN 5.2320 5.2625
EURJPY 100.47 100.72

Please note these rates are “interbank” rates ie they indicate where the market is currently trading and are not indicative of the rates offered. Rates are dependent on amount transacted. It is important to remember that foreign exchange rates fluctuate all the time.

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New Democracy, same problems

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