26 Jan 2015
EUR might see heightened volatility when Greek negotiations start – MP
FXStreet (Barcelona) - Dean Popplewell, Director of Currency Analysis at MarketPulse, comments that at the moment markets should be pricing a fair value EUR QE vs. an expected high margin win for Syriza, and that the high volatility for the single currency will arrive at a later stage when the external negotiations begin for Greece.
Key Quotes
“The markets initial reaction was to further penalize the EUR, pushing it briefly to a new 11-year low (€1.098) in Asia as the Greeks radical leftist vowed to tear up term’s of the country’s bailout. However, the EUR weakness has been short lived, with the single unit riding higher outright (€1.1246) and against the yen during European trading (€133.00).”
“The market seems a tad more confident that last week’s QE support by the ECB leaves the markets less vulnerable to break up fears. Many are viewing Draghi’s backstops have “effectively firewalled Greek developments and should limit contagion’.”
“In translation, investors will have to gage the EUR’s natural price weakness that is supported by QE and not by euro-zone periphery fears.”
“Many will interpret the larger than expected victory by Syriza could be leaving the EUR vulnerable for further short selling in the short term. The fact that the single unit is down 14-big figures since December, with little or no retracement, consolidation and some profit taking could be a risk factor to some of the weaker EUR short positions.”
“The Greek results gives Tsipras a strong mandate to push through major national changes, however, the external negotiations will be more of a market risk factor, and are sure to heighten volatility over the coming months. But, that is a “tomorrow” problem; for now the market should be pricing fair value EUR QE vs. an expected Greek result with a wider margin win.”
Key Quotes
“The markets initial reaction was to further penalize the EUR, pushing it briefly to a new 11-year low (€1.098) in Asia as the Greeks radical leftist vowed to tear up term’s of the country’s bailout. However, the EUR weakness has been short lived, with the single unit riding higher outright (€1.1246) and against the yen during European trading (€133.00).”
“The market seems a tad more confident that last week’s QE support by the ECB leaves the markets less vulnerable to break up fears. Many are viewing Draghi’s backstops have “effectively firewalled Greek developments and should limit contagion’.”
“In translation, investors will have to gage the EUR’s natural price weakness that is supported by QE and not by euro-zone periphery fears.”
“Many will interpret the larger than expected victory by Syriza could be leaving the EUR vulnerable for further short selling in the short term. The fact that the single unit is down 14-big figures since December, with little or no retracement, consolidation and some profit taking could be a risk factor to some of the weaker EUR short positions.”
“The Greek results gives Tsipras a strong mandate to push through major national changes, however, the external negotiations will be more of a market risk factor, and are sure to heighten volatility over the coming months. But, that is a “tomorrow” problem; for now the market should be pricing fair value EUR QE vs. an expected Greek result with a wider margin win.”