Risk currencies continued to grind lower overnight under the weight of ongoing political turmoil in Greece. With the New Democracy Party's Antonis Samaras failure to form a coalition government, the mandate now falls to the left-wing Syriza party who are staunchly opposed to the austerity measures agreed in exchange for bailout funds. Should the Syriza party succeed in forming a coalition government, the writing appears to be on the wall for Greece - bailout terms breached; troika funds withheld with a disorderly default and return to an independent currency a likely scenario.
European equities lost significant ground with Frances CAC losing near 3 percent on the day and the negativity spilled over to U.S markets, albeit to a lesser degree. The Euro continued its south-bound trajectory against the greenback intermittently testing the 1.30-figure overnight but in typical ironic fashion remained the preferred option against the higher yielding Aussie and Kiwi dollars. In short, we're in a clear risk-off phase and the perceive safety of the US dollar and Japanese Yen remaining the currencies of least resistance.
The Australian dollar continued to slide overnight with European politics the primary directive. The local unit fell to lows of 100.88 US cents before regaining moderate ground but still remains under pressure slightly above 101 US cents. We anticipate a sustained break to the downside in local trade to trigger further selling pressure with the trend suggesting a better than even odds chance of a near-term move below U.S dollar parity. Stronger local employment number on Thursday with solid Chinese data on later this week may provide short-term buoyancy, however its clear the trend will be set from abroad with European political dramas front row and centre.