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Euro Holding Gains As Grexit Fear Eased

Published 01/27/2015, 04:44 AM
Updated 03/09/2019, 08:30 AM

Euro is holding above 1.12 handle against dollar for the moment after recovering from yesterday's post Greek election low of 1.1096. Markets are viewing that Syriza's win in the election as anti-austerity rather than anti-euro and the concern over a Grexit was eased. Eurogroup chairman Jeroen Dijsselbloem also said that yesterday that there was "no script available" for Greece to exit the Eurozone and said the issue was "irrelevant". Meanwhile, he also noted that leaving the eurozone zone won't "solve the challenges Greece is still facing" and further recovery best takes place within the bloc. While Euro recovered, the near term outlook stays bearish against dollar, yen and sterling and we'd expect selloff in the common currency to resume soon after brief consolidations.

Swiss Franc dipped on speculation that the SNB intervened in the markets after announcement to remove the the exchange rate cap. Data shown in SNB's website showed that sight deposits jumped to CHF 365.5b in the week ended January 23, up from prior week's CHF 339.6b. That's the largest jump since July 2013. Sight deposits are the cash like deposits that commercial banks hold with SNB. Historically, sign deposits jumped when SNB intervened. Analysts noted the data showed SNB should have intervened after the currency is back to a free floating market.

In UK, BoE policy maker Kristin Forbes said that she saw inflation to fall further in the new few quarters and by would pick up more strongly than expected afterwards. And she noted that if these scenarios occur, that would "imply an earlier increase in interest rates than currently expected, especially in order to ensure that any subsequent interest rate increases are slow and gradual." Last week, BoE governor Mark Carney also emphasized the importance to look through the impact of falling oil prices on inflation. But overall, markets are still expecting BoE to stand pat throughout 2015.

On the data front, Australia NAB business confidence rose to 2 in December. UK will release index of services and Q4 GDP in European session. US will release durable goods, S&P Case Shiller house price, new home sales and consumer confidence.

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