Syriza wins decisive victory, sends euro lower

Monday, January 26, 2015

The euro briefly sank to a fresh low earlier this morning, trading below 1.1100 against the dollar after results emerging from yesterday’s Greek elections indicated anti austerity party, Syriza, had won a decisive victory. With almost all votes counted Syriza led the way with 36.3% of the votes against the incumbent New Democracy party led by Antonis Samaras who garnered 28% of the vote. The outcome, which was more pronounced than initial polls had expected, gives Syriza a projected 149 seats in parliament, just two short of an absolute majority. The euro immediately sank lower on the outcome, extending last week’s precipitous declines, as further uncertainty surrounding the shared currency knocked investor confidence and saw a reduction in risk appetite. European stock futures were trading mixed while US benchmark futures indices were trading cautiously early on.

Investment demand for safe havens saw gold prices post gains for a third straight week last week as a combination of uncertainty surrounding Sunday’s Greek elections and last week’s announcement of significant QE from the ECB saw investors retreat from risky assets into the yellow metal. Gold prices have added almost 10% since the start of the month with the SPDR Gold Trust ETF experiencing significant inflows in recent weeks with total holdings rallying from 704.83 tonnes at the start of the month to 741.65 tonnes on Friday, the highest level since October last year. Despite the general consensus of lower gold prices in 2015 among economists and forecasters, as the ongoing threat of lower inflation across major markets and the expectation of rising interest rates in the US later this year crimp demand for the precious metal, investment demand has seen significant inflows in recent weeks with prices touching a six month high above $1,310/oz last week. Activity early this morning has seen prices pull back towards $1,290/oz losing some territory at the start of the week largely due to a stronger dollar, with the dollar index trading towards 95.527 at one point early on this morning before drifting back below 95.00 ahead of the European session.

Chinese stocks listed in Hong Kong dropped for the first time in five days as investors struggled to justify the recent rally, which has seen the Hang Seng China Enterprise index gain 6.8% since last Monday. Energy and financial firms led the sell-off as investors took the opportunity to take short term profits off the table, after the benchmark index tested near term resistance on Friday. With a broad reduction in risk appetite in recent sessions we could see additional consolidation in the coming sessions, in line with the broad market outlook as investors look for the necessary impetus for any additional moves higher.

EUR briefly sinks to fresh low, below 1.11

EUR Curncy Euro Spot Daily 26 2015 01 26 07 36 18 

Gold investment holdings improve on safe haven demand

GDTRGOLD Index SPDR Gold Trust 2015 01 26 07 41 12

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Topics: Gold, ECB, EUR
More from: Kash Kamal