Euro falls to 12 year low as Syriza win sends jitters through markets (video)
Currencies Direct January 26th 2015 - 2 minute read
The last couple of weeks have been turbulent for the euro. First, the Swiss central bank removed its peg against the currency, initiating a downward spiral. The European Central Bank added further to the chaos after announcing a quantitative easing package of €1.1 trillion over the next 21 months, commencing in March. Furthermore, the radical-left party Syriza, promoting anti-austerity in the country, won the general election in Greece by a comfortable margin. This sent the euro to another low against Greenback and EUR/USD currently trades just under the 1.12 level.
Syriza’s campaign, based on abandoning Greece’s budget constraints and negotiating a write-down of Greek debt, enhances the chances of an exit from the Eurozone unless a compromise is reached.
The US dollar continues to remain the strongest currency in the wake of economic and political tensions elsewhere. An interest rate decision meeting from the Federal Reserve starting tomorrow will be the major focus for markets. It is extremely likely that no change will be made, as this could lead to further dollar strength and bring about the risk of deflation. Economic data from the Eurozone comprises of the German IFO business climate report out later today.
Sterling remains weak against the US dollar after extending losses to 1.4960 on Friday; GBP/USD currently trades at 1.5025. Retail sales numbers were out last week and despite coming out much higher than expected at 0.4% in December, the pound has struggled to hold any form of strength as a very strong dollar and extreme Eurozone economic weakness continue to weigh on Sterling. However, a fall in the unemployment rate to a six-year low has helped GBP/EUR reach a seven-year high; after the result of the Greek election it currently trades at 1.3405. Focus will now turn to tomorrow’s preliminary GDP print for further direction for Sterling.