Analysts at Barclays note the Greek election and reiterate downside expectations in EUR/USD in 2015.
“Greece holds its general elections on 25 January 2015. The Syriza party is maintaining its lead, according to the recent polls, but with insufficient support for a majority government. If these polls prove correct, our baseline scenario for Greece envisages a Syriza-led coalition, possibly with some members of the PASOK and/or To Potami parties. However, we do not rule out alternative scenarios, such as a hung parliament, which could call for new general elections in 2015.
The outlook remains fraught, driven entirely by political developments and the opinion polls in the run-up to the election itself. Until we get more clarity in this regard, Greek government bond yields are likely to remain illiquid, subject to volatility, at elevated levels and only for investors with a suitable risk appetite.
…While the key driver of our EURUSD forecast for sustained depreciation to 1.07 in Q4 15 is diverging monetary policies, given our expectation for the announcement of QE by the ECB at its January 2015 meeting, we think this political uncertainty should provide another deterrent to EUR ownership.” See eFX Plus.
A fresh risk for the euro came today with former Greek Prime Minister George Papandreou jumping back into politics to form a new party. The governing PASOK party was formed by his father but most of his former associates have refused to form a splinter group.
Early polls show him taking 4-5% of the vote, with most of it from Syriza rather than PASOK but the Greek political mood is always changeable.
