Euro Looks to Greece for Direction as Key Election Looms Ahead

Talking Points:

• Aussie, NZ Dollars Rise as Yen Weakens on Firming Risk Appetite in Asia
• Euro May Fall on Sovereign Risk Fears if Greece Triggers Snap Election
• See Economic News Directly on Your Charts with the DailyFX News App

The major currencies were little-changed in the overnight session as markets came on-line for another holiday-shortened trading week. The Japanese Yen came under pressure early in Asian trade as stocks advanced, sapping demand for the safety-linked unit, but the move fizzled on approach to the opening bell in Europe. The sentiment-geared Australian and New Zealand Dollars managed to hold on to modest gains however.

Looking ahead, the spotlight turns to Greece, where lawmakers may be setting up to hold a third and final vote on electing a new President. Prime Minister Antonis Samaras has thus far failed to gather enough votes to install his nominee Stavros Dimas as the new head of state, replacing outgoing Karolos Papoulias, in two previous polls. If the third attempt ends in failure, a snap election will be triggered.

Polls show such a contest may see the ruling coalition unseated by the opposition Syriza party, which opposes austerity implemented as part of Greece’s EU/IMF bailout. That means the possibility of an emerging Syriza-led government has scope to rekindle Greek sovereign risk concerns, weighing on the Euro. Alternatively, the single currency may rise if Mr Samaras secures at least 180 votes in favor of Mr Dimas in the 300-member legislature and rescues the precarious status quo.

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Asia Session

European Session

Critical Levels

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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