Euro Mildly High On Greek Poll, Recovery Limited In Light Trading

Euro opened the week mildly higher as opinion polls in Greece over the weekend showed that New Democracy was placed first leading a margin of as much as 5.7% over Syriza. That's the first in all six opinion polls ahead of the June 17 election. New Democracy is one of the pro-bailout parties which, along with Pasok and the poll, reduced some fears that the anti-austerity left-wing Syriza could win the next election and eventually lead Greece to leave eurozone. However, we must note again that New Democracy was the winner in last election in May and they failed to get a majority in the parliament with Pasok. And that's the reason for the political uncertainties in Greece and the risks of eurozone exit. Hence, the poll just showed that the situation might not be the worse, but it can't be considered good for euro. And we'd emphasize that June's election in Greece could just be as indecisive as the May one.

In Spain, lender Bankia's shares plunged after resuming trading today. Trading was suspended last Friday as the bank announced that it will need EUR 19b in government bailout. It's reported that Spain could recapitalize Bankia with government bonds in return for shares. And, Bankia could then use the sovereign paper as collateral to get funding from ECB. Effectively, that would force ECB into sharing the task of the bailout of the Spanish financial sector. Analysts are skeptical about the plan since even though it's technically possible, strong objection would be seen from ECB and Germany.

Some volatility is seen in EUR/CHF again today as it's reported that SNB is seeing considerable upward pressure on the Swiss franc. SNB President Jordan noted that "situation over the past few weeks has worsened and has become a lot more uncertain." And Jordan acknowledged that "demands for an increase" in the EUR/CHF floor, though he said that the "current minimum exchange rate is realistic." However, he did say that there could be capital control measures on inflow of funds into the Swiss currency. An SNB spokesman Meier also confirmed saying that the bank will “examines the application of measures which go beyond the competencies of the central bank -- for instance the introduction of capital flow check."

European stocks are mildly higher today but with Swiss, France, Germany and US on holiday, trading is rather subdued overall. We'd expect more consolidation for the reset for the as dollar pares gains. But markets will continue to be cautious on any negative news out of eurozone.