Traders are on a euro watch this week as political uncertainty is driving financial market tension. Today 5/15, a couple of key events headlines the press. 1) Greek coalition talks break down as President Karolos Papoulias says re-election will be taking place. June 17 is the most likely set date. The uncompromising position of the Syriza party, which is anti-euro and austerity, has been noted to be the reason. 2) Hollande and Merkel seem to be able to put differences aside to agree that renegotiation of bailout terms should be had, and that more material growth measures have to be included.
Here's a video of Merkel and Hollande speaking: http://www.bbc.co.uk/news/world-europe-18081075
Hollande as a socialist pushing a populist view that is anti-austerity, seemed to have put that campaign mode down and be more diplomatic in saying that the German-France relationship is strong. Can this type of talk allay the fear of a euro break-up of some sort that would be a result of the domino effect from a Grexit? If the Syriza party does gain control, or is a major part of a somehow managed coalition, will it also retreat a bit from its campaign rhetoric?
What will the market do with the euro before the June 17 re-election?
There is still room to fall toward 1.2625 before the re-election and before EU leaders come up with some plan that can give some relief to the risk-off mood in the markets.
Fan Yang CMT is a forex trader, analyst, and main contributor for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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