The euro led risk currencies higher this morning, after projections showed Greece’s two largest pro-bailout parties winning enough seats to forge a parliamentary majority, easing concerns that the country would be forced from the currency bloc.
The 17-nation euro extended last week’s 1% jump versus the dollar after New Democracy won 30% of the vote and got 130 seats in the 300-seat legislature, according to projections from the Interior Ministry based on partially counted returns. Socialist Pasok, with 12.5%, gained 33 seats. That would give the parties a majority in parliament if they choose to form a coalition. Anti-bailout party Syriza received 26.6% and 71 seats, the results showed. EUR/USD printed a high of 1.27481 this morning and is currently consolidating just above 1.27. Should the current ascent in EUR/USD continue, 1.28 will be the next key level to look out for. Many analysts remain bearish on the euro given the political uncertainty in Greece is not likely to come to an end anytime soon and, as such, questions about Greece's continued membership of the eurozone will haunt the currency into the future. The pair closed at 1.26386 on Saturday morning. GBP/USD saw similar price action as the pair rallied to a high of 1.57099 today.
The question now is how long will the euphoria last, and what are the key events to look out for going forward? New Democracy and PASOK together are likely to have sufficient numbers to form a coalition government. Whether such a government will ultimately be formed is another matter, and it seems days of tortuous negotiation still lie ahead. Today, as well as listening for political commentary in Greece, investors are likely to keep one eye on the G20 meeting, although given Greece's relatively benign election outcome, we would be surprised if the G20 felt compelled to make any market-moving announcements.