The UK released no major data on Friday and only one major piece of data was released from the States; Sterling still had a volatile trading session due to the markets anticipation for the Greek elections over the weekend.GBPEUR traded within a 170 pip range on Friday ahead of the Greek elections taking place, hitting a high of 1.2433 against a low of 1.2264 set in early morning trade before 9am. Since the elections have taken place we have seen GBPEUR retrace slightly and is now trading around 1.2350 having set a high of 1.2385 overnight. Technical resistance has stretched to 1.2656 and with lower support set at 1.2153 we can expect another week of extremely wide trading ranges as news of the Greek coalition emerges.
GBPUSD hit a high of 1.5725 late Friday evening during the US trading hours on the lead up to Greek elections also. This move was seen from the low of 1.5478 set in early morning trade on Friday, resulting in a 2.5% move overall. Cable is now trading around the 1.5662 levels this morning and with resistance levels climbing to 1.6056 now, it seems sterling has potential for further gains. Strong support is currently at 1.5650, and a close above 1.5818 is the next target for upside. Markets will now be awaiting the release of the MPC meeting minutes, due on Wednesday at 9.30am.
According to Rightmove, Britons looking to sell their home have grown confident this month, pushing the average asking price up to its highest on record rising 1.0% in June’s survey to £246,235, the highest average price since the survey was first carried out in September 2002.
EURUSD saw a choppy trading session Friday as well, originally starting the day trading in the 1.26’s to then fall to post the low of 1.2592 by early afternoon. However the pair echoed the risk on trading that we saw on Cable and EURUSD climbed to a high of 1.2727 over the weekend and the pair still reside within the 1.27’s this morning. Breaking above the 1.26 resistance last week means the euro has potential for further gains, near term resistance is as high as 1.2900 now.
The outcome of the Greek election sparked a rally in risk assets in Asia, as investors were encouraged by the victory of the pro-bailout New Democracy party, pushing up both currencies and stock markets. Antonis Samaras, has already vowed to respect the country’s commitment to a €173 billion bailout agreement with the EU and the IMF, and invited all the parties that support Greece’s membership of the euro to join a national “salvation” government.
The conservative New Democracy party won 30.23% of the popular vote, which translates in 130 seats in the 300-seat parliament. It was followed by radical Left Syriza party, which received 70 seats. Socialist Pasok was third with 34 seats, and the smaller Democratic Left party, which may also play a key part in the coalition-building talks that will begin today, received 16 seats. New Democracy Leader Antonis Samaras has already started informal talks with the Pasok party to form a new government, with a cross-party coalition likely to be formed by Wednesday.
The conservative victory in Greece was quickly felt in the currency markets early in Asia, as concerns that Greece will leave the euro zone dampened. The Australian dollar also received a boost against the US Dollar, climbing to 1.0114 from 1.0014 late Friday in Australia. The US dollar strengthened against the yen, to 79.08, compared to 78.70 late Friday in New York.
The outcome in Greece has also helped Spanish and Italian bond yields ease sharply this morning, this welcome relief comes just after the Moody’s downgrade of Spain’s credit rating caused the Spanish debt to rise over 7% last week, they are currently priced at 6.76%.
Another important election result came in France, where the Socialist party, to which France’s new president Hollande belongs, gained absolute majority in the parliamentary elections yesterday. Now Hollande’s party has full ability to implement political reforms. The decision is due to be ratified by tomorrow.
Polish Finance Minister Jan Vincent-Rostowski said on Monday that Poland is in a much stronger position -“thanks to others buying time during the euro-zone crisis” and after taking steps to reduce its public deficit. Poland’s deficit peaked at 7.8% of economic output in 2010, raising concerns at the time over the country’s public finance.
Indian policy makers are worried about the frail financial health of the euro zone, particularly expressing anxiety over Greece’s ultimate fate in the currency bloc. Indian PM Manmohan Singh said continuing economic problems in the region could hurt India’s growth, which has already slowed to a worrying level.
New Zealand PM John Key said early this morning that the European debt crisis remains the single biggest threat to the island nation’s economy, despite news that Greece’s pro-bailout New Democracy is moving to form a coalition. Key said yesterday “Greece will continue to be on European life support” and “the European debt crisis remains the biggest threat to the New Zealand economy by some margin,”.