Forex Commentary by Chief Analyst of Windsor Brokers, Mr. Slobodan Drvenica
World financial markets are in high-volatility phase, fueled by economic crisis, widening the divergence between big economies of Eurozone and United states and spiraling oil prices, which are approaching levels last time seen in 2008.
With the US economy showing strong signals of recovery and Fed planning to start rising interest rates, across the Atlantic, the situation is different. Eurozone’s economy is still in descending mode and the European Central Bank took one of last remaining tools to support the weakening economy and prevent deflation – introduced a massive bond-buying programme, also known as Quantitative Easing.
The decision further pressured Euro, which is already in strong acceleration lower, following last week’s shock from the Swiss National Bank to remove the limit on the EURCHF at 1.20, to depreciate around 12.5% against the dollar.
But this is not all. Without time for consolidation, big events are continuing to come. Early elections in Greece which will be held on Sunday the 25th January 2015 are now in immediate focus.
Greek leftist party Syriza shows the biggest chance to win elections, according to opinion polls that show Syriza’s widening lead against their major opponents, conservative New Democracy Party.
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In case of winning the elections, Syriza promises Greek people that they will turn their back on four-year austerity of an EU/IMF bailout and demand debt write-off from European partners.
With unemployment in Greece of 25%, Syriza has a good support for winning elections.
Story of “GREXIT” that circulates in the market for some time could materialize and prompt Greece’s exit from the Eurozone and logically from the monetary union. This will be a precedent in the history of European Union and would likely trigger further tectonic movements within the Union.
Already weak Euro, which lost nearly 5% after yesterday’s ECB decision, could come under increased pressure, in case leftist party wins Sunday’s elections in Greece, with expectations of further acceleration of already high volatility in the markets.
Article courtesy of Windsor Brokers
