Greek Syriza party vows to end austerity after coalition government formed
27/Jan/2015 • Currency Updates•
A lack of data releases in the markets on Monday made for a relatively quiet start to the week. News was dominated by Greece, as the far-left Syriza party announced the forming of an anti-austerity coalition government and the swearing in of Alexis Tsipras as the country’s new Prime Minister.
A quiet start to the week for the UK economy saw Sterling trade within a narrow band, climbing slightly by 0.25% against the Dollar, although down by 0.1% versus the single currency.
The Pound gained marginally on Monday after hawkish words from Bank of England policy maker Kristin Forbes. Forbes, who was expected to be the third committee member to vote for an interest rate hike before the inflation slowdown in December, expects a stabilisation in the UK economy this year. In an interview with the Wall Street Journal, the American was optimistic about global prospects due to robust growth in the US, which may create scope for Sterling strength in the near term. Such words suggest the UK may trigger an interest rate increase sooner than the markets expect.
Growth figures out this morning at 9.30am are expected to show that growth in UK economy in the fourth quarter of last year was at its slowest rate since mid-2013.
Markets remained calm in Europe on Monday despite the success of Greece’s left wing Syriza party, with the Euro appreciating 0.3% against greenback.
As the pre-election polls had suggested, the anti-austerity Syriza party cruised to victory at Sunday’s Greek election, although falling just short of an overall majority with 37% of votes cast. A coalition with the right-wing Greek Independents was formed early on Monday morning, with Alexis Tsipras sworn in as Greece’s new Prime Minister within a matter of a few hours of the announcement. The party, which has talked about reducing Greek public debt by 50% will have to move quickly on negotiations with its European partners with the current bailout extension due to expire at the end of February. Elsewhere in Europe, Business Confidence in Germany increased for the third consecutive month to 106.7, its highest level since July last year. The monthly IFO indexes all showed gains, with Expectations climbing 0.7 index points to 102.0 and the Current Assessment up 1.7 to 111.7.
No data out in the Eurozone today, although the Economic and Financial Affairs Council will be meeting during the day.
Monday was a subdued day for the US currency, with most volatility once again driven by events in Europe. The US Dollar index remained near its record high, although was down slightly, falling 0.1% during the course of the day.
The only data release of any note showed a slight slowdown in manufacturing in January. The Dallas Fed Manufacturing Business index disappointed, with a reading of -4.4 representing a slight contraction in activity. Recent drops in oil prices are becoming a real concern for manufacturers in oil-producing US regions.
A busy trading session in the US today begins with the release of Durable Goods Orders for December at 1.30pm. This will be followed the Conference Board’s measure of Consumer Confidence at 3pm London time.
Rest of the world
The Russian Ruble was back in the spotlight on Monday after violence in Ukraine increased the likelihood of tougher sanctions, which would worsen the nation’s economic slump. The currency suffered its largest decline in two weeks, falling by 2.7% against the Dollar.