Fundamental View
Sunday saw the inevitable victory for the Syriza party in Greece and Alexis Tsipras as premier. He has this morning been in talks to decide his coalition partner; the Independent Greek Party, To Potami and KKE are among the potential candidates, a selection which seems relatively unusual given the political views of Syriza. With this political victory comes numerous issues for the European Community as the anti-austerity party now takes the helm on fiscal spending. The Germans commented this morning, stating that they’d “be willing to support the newly installed Greek Government.” However they were very firm in stipulating that “the new Greek Government should honour previous agreements…” implying their support is linked directly to the following of agreements to adhere to austerity measures previously outlined. The new President will be installed by the 13th of February, after which the calendar for the formation of Government accelerates into the end of February. Although the risks are outlined, we believe that the media has to some extent stoked the furore surrounding a potential Greek exit. Market participants have not reacted negatively and consensus remains that a Greek exit is a very unlikely. We also had comments from Bank of England’s Carney, repeating that market participants have “priced in a UK rate hike too late.” This is, however identical to comments he made last summer and we have seen no real movement on this. We did, in fact, see the dissenters within the BoE Monetary Policy Committee change their decision from 7-2 to 9-0 for a “no hike”, implying that even the MPC are attempting to stave off early rate-hike expectations.Today’s View
This morning saw the main data for the day in the form of the German IFO number, printing mixed but roughly in-line with the majority of analysts’ expectations. We’ve seen very little movement in the wake of this with the majority of traders looking to price out Greek exit risk. Although the EURUSD sold off on the initial Greek political news, we are now trading back above the 1.1200 handle and also the pivot level, further adding weight to the argument that market participants have priced out risk of a Greek exit. This afternoon sees very little data on the calendar with only the Dallas Fed Manufacturing Activity to look for. We expect that the neutral sentiment is likely to continue as participants reassess their positions and adjust accordingly.Alternative View
The market is likely to be quiet in the wake of last week’s ECB announcement and the Greek Election results from yesterday. Traders are advised to limit risk exposure in low volume markets.
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