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GREEK ELECTIONS: Pro-Bailout Party Leads in Early Results; EUR Rallying

By , Currency Strategist
17 June 2012 20:34 GMT

THE TAKEAWAY:June 17 Greek Parliamentary Elections > Outcome Could Determine Greece’s Fate in Euro-zone > Early Results Favor Pro-Bailout Party > EUR BULLISH

The EURUSD jumped to its highest level in three-weeks after early results from the Greek elections showed that the pro-bailout New Democracy party was primed to come out as the victor. Essentially, there were two main parties vying for control of Greece’s government this weekend, with the anti-bailout Syriza party representing the main opposition to New Democracy.

In a sense, and especially given the rhetoric deployed by non-Greek European leaders, these elections were to determine the fate of Greece’s inclusion in the Euro-zone. It boiled down to this: a vote for New Democracy would be considered pro-Euro; while a vote for Syriza would be considered anti-Euro.

With nearly 60 percent of the official vote tally in, results were largely skewed in favor of a victory by New Democracy but without parliamentary majority, the likeliest result according to a broad consensus from citizens and reporters in Greece. Thus far, the results for the major parties show:

  • NEW DEMOCRACY: 30.1%, 130 seats
  • SYRIZA: 26.5%, 70 seats
  • PASOK: 12.6%; 33 seats.

Given these results, it appears that a New Democracy-PASOK coalition would have the majority necessary (163 seats against the required 151 seats) to form a government. However, some concerns remain. Primarily, PASOK officials have stated that they will only be willing to form a “grand coalition,” that is to say, a government involving Syriza as well. According to sources, Syriza leader Alexis Tsipras has already turned down New Democracy’s offer to form a coalition, which in turn should prevent a “grand coalition” from forming.

Ahead of the market open, the EURUSD traded in wide ranges as expected, dipping as low as 1.2521 before rallying up to 1.2733. Should the EURUSD open up at its current level, trading at 1.2703 at the time this report was written, then this would represent a 0.5 percent gain from Friday’s close. When considering how the EURUSD gapped open after the Spanish bailout package was announced – good for gains of approximately 0.9 percent – the result is far less impressive.

To follow developments out of Greece and the rest of the Euro-zone, visit DailyFX’s FX squawk box, the Real Time Forex News Feed.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, send an e-mail with subject line "Distribution List" to cvecchio@dailyfx.com

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17 June 2012 20:34 GMT