MARKET BRIEFING – LONDON OPEN 21.12.2015
Less than a year ago, Europe’s leaders were wondering how they would handle the fallout of a Greek general election result that brought to power a political party of the radical left.
What followed was months of intrigue, failed negotiations, demonstrations on the streets of Athens as the Greek Syriza party led by its charismatic leader Prime Minister Alexis Tsipras and his trusted lieutenant in the shape of the combative, yet clear speaking Finance Minister, Mr Yianis Varoufakis battled but ultimately lost their battle with Germany’s iron lady, Chancellor Merkel.
Fast forward to roughly a year and this morning we are trying to come to terms with a general election result that is both important for Spain but also Europe.
According to published election result data, the ruling Partido Popular as expected took the largest share of the vote. However, PP, as it is also known no longer, commands enough elected members of the legislative assembly to allow it to form a majority Government.
There will now follow a scramble to form a new coalition government. The Popular Party as the block with the highest share of the vote and the most members of parliament are going to argue that they should form the next government.
This will be a difficult undertaking as both the new political newcomers, Podemos and Ciudadanos have campaigned on tickets of political renewal and would not want to be associated with past legacy of corruption that has so tainted Spanish politics. Furthermore, Podemos being a political party of the radical left would find it very difficult to share government with the Peoples Party.
As for Ciudadanos, although it is a political party of the centre and middle classes a decision by its leader Albert Rivera would possibly be to shun forming an alliance with the centre-right PP out of fear that this will be seen as a sell out by the electorate who voted for his party.
What the markets and the European Union fears the most is for a coalition of the left to be formed by the traditional socialist PSOE and Podemos. However, the university professor comes political leader Pablo Iglesias Turrion would seem to be a man who is unwilling to compromise his principals.
So what is left is a coalition of the weakened establishment of PP and PSOE. Although this would seem a very unlikely solution, however, such a coalition of national unity was formed in Greece when the conservative New Democracy and the Socialist PASOK buried their differences so as to keep Syriza out of power.
Such a coalition would maintain the establishment grip of Spanish politics and would be welcomed by both the European Union and the markets.
Furthermore, it would be hoped that another term of a PP Government but in this case supported by the PSOE would give the new administration time to push the country back into solid economic and job growth. With Spain back on track, the popularity of Podemos and Ciudadanos would wane.
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.0980
Target 2: 1.0725
Projected range in ATR’s: 0.0129
Daily control level: 1.0800
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5025
Target 2: 1.4775
Projected range in ATR’s: 0.0126
Daily control level: 1.4950
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 123.30
Target 2: 120.15
Projected range in ATR’s: 1.09
Daily control level: 123.30
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.0045
Target 2: 0.9810
Projected range in ATR’s: 0.0118
Daily control level: 0.9795
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.4050
Target 2: 1.3815
Projected range in ATR’s: 0.0119
Daily control level: 1.3850
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7260
Target 2: 0.7075
Projected range in ATR’s: 0.0093
Daily control level: 0.7100
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1082.00
Target 2: 1049.00
Projected range in ATR’s: 16.63
Daily control level: 1078.25
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 37.60
Target 2: 34.30
Projected range in ATR’s: 1.67
Daily control level: 37.15
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