Jyske Bank just issued a research report on the Greek elections – this report will be available in English later on today.
“Due to the election victory to New Democracy there is a great probability that Greece may negotiate a solution with the EU. This will ensure that Greece may continue to obtain loans from the EU and the IMF and hence that Greece will stay in the euro. Greece is still facing huge challenges and a Greek euro exit may still become a reality in the slightly longer term.
We expect that the Troika will pay a visit to discuss reservations/guidelines relating to the renegotiation of the Greek rescue package. The first indications of the ‘new’ rescue package will be seen once a government has been formed. We expect that a new government will be formed within a short period of time, and then we will see the financial markets’ actual view of the Greek tragedy. Most likely the FX market will trade with a positive bias and some fluctuations over the next week or so, but investors should bear in mind that already prior to the elections over this past weekend, the market had to some extent anticipated the joys.
It should also be noted that several FX information systems show wrong trading levels for EURNOK, EURSEK and EURGBP. For instance, Bloomberg’s data for EURNOK.
Today the G20 meeting begins in Mexico, and various statements may have a brief effect on the market. Tuesday will see ZEW (DE) and housing starts (USA). Wednesday will be ‘big interest-rate meeting day’ – we will in particular keep an eye on the UK, Norway and the US. Particularly the interest-rate meeting in the US will attract attention as this meeting is a two-day meeting with a subsequent press conference. We do not expect that any new stimuli will be announced this time around, and therefore we may see a setback in risk appetite this week – as many are expecting the introduction of QE3. Thursday will see focus on PMI data – both from the US and the EU. Our economists expect a slight decline in the euro zone’s PMI data, which may have a slightly positive effect. On Thursday afternoon, we will see an interesting auction of government bonds in Spain and the Euro group will meet. Friday will end the week with the announcement of the important business-trend survey IFO from Germany. Jyske Bank expects a slight decline.
EURNOK (BUY): We recommend BUY EURNOK; T/P at 763.85; S/L at 747.75. EURNOK trades just above the strong level of support at 749-50 – we expect that it will hold firm.
EURSEK (BUY): We recommend BUY; T/P at 908; S/L at 773.75. Strong support is found in the range of 878-880. We do not expect this to be breached.
EURPLN (NEUTRAL): If the cross rate falls to about 422-424, it should be considered an attractive opportunity to buy with S/L at 419.75.