As if the Euro-zone wasn’t already shaken enough, the anti-austerity Syriza won a general election in Greece on Sunday, creating even more uncertainty about the future of the euro zone.
Syriza won, with 80 percent of the votes counted Syriza led the New Democracy, the ruling centre right party, by 36.2 percent to 28 percent. Projection of 149 seats, two short of an absolute majority. Mr Tsiparas will now have to manage very tricky financial and political challenges. With Mr Tsiparas words ringing loud that “Greece’s economy would be safe in the Syriza’s hands,” we are wondering how the funding gap of €28bn is going to be filled. Syriza’s first act and priority would be to launch a €2bn welfare package to assist about 35 percent of the population living in poverty.
The ECB has backed the Greek banks with emergency loans, to avoid bottlenecks in the liquidity of Greek banks post-election. The Emergency Liquidity Loans apply for 15 days, and if this is not enough time which it won’t be, a new request will need to be made. This perhaps will be the first fight on Greece’s hands.
The issue of wage growth is still plaguing the US making it more and more unlikely that a rate rise will happen any time soon. A breakdown by the Economic Policy Institute shows that wages adjusted for inflation in health and education services were just 2 percent higher at the end of 2014 than they were half a decade ago in 2009. coincidently when unemployment levels began to drop from their peak.
On the other side of the pond and coin Mr Carney has warned investors that interest rates are unlikely to stay this low for as long as originally expected, as the Bank of England is closely monitoring the pickup in wage growth. The MPC was more than optimistic about achieving close to 2 percent inflation target , “it’s not lost on us that wages are picking up now in most recent data and are consistent with our expectations.” He further highlighted that there was a large divergence between the markets expectations for a rate rise (summer 2016) and the reality, market and policy makers expectations could have a large impact on financial system volatility.
How the Markets Reacted
U.S. stock index futures signaled a lower open on Monday after the election results were out.
The results immediately hit Mr. Euro as he fell to a fresh 11-year low of 1.1098 against Ms. USA, before recovering some ground, having already weakened dramatically last week after the European Central Bank announced new stimulus measures.
European stock fluctuated between positive and negative territory for much of the European morning session.
Mr. Euro calmed down before New York open, and with light data on the economic calendar and a major snow blizzard hitting NYC, I doubt we would see more volatility for the rest of the session.
In a long run, we could have 3 possibilities for Mr. Euro’s movements to the beat of Greek elections:
1- The wait-and-see consolidation move
2- Up-move; that is if Greece can fix its finances and spur more confidence in the region
3- Nothing changes and Mr. Euro continues on his downtrend.
What do you think?
I’m heading off to the airport today and hopefully my flight won’t cancel today due to the “historical snow blizzard” that is supposed to hit New York today. As much as I love making snowmen and playing angle wings on the snow, nothing beats working from Miami, does it?