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How is the Euro performing versus its major counterparts after Barack Obama's victory and ahead of the Greek vote for another round of austerity measures?
Rather poorly—is the answer. Having rallied initially, EUR/USD is falling through the point, to which we went into the election yesterday. The Euro is also softer on the crosses in part because the market shows less tolerance to the risk today. The Euro, which generally trades as a proxy for general risk, has been hit as markets are less risk-tolerant.
To your mind, will Greece secure bailout funds?
Our main expectation is that the Greek parliament will vote "Yes" to the austerity package this evening. With that package passed, the Eurogroup meeting on Monday will be able to set out the longer term plans for Greece and release the next tranche funds. For the moment Greece will remain on track, staying within its bailout programme. The risk to that scenario is clearly that something unpredictable happens in the Greek parliament this evening. That risk is small, but definitely not zero.
What performance do you expect from the Euro immediately after we receive results of the Greek vote?
I think we would see something like a relief rally, if that is the case. The market clearly is very uncertain, going into this vote. The consequence of a "No" vote would be very severe indeed, even if the market is only attaching a small probability to that risk. If that does not materialize, I think there should be a scope for the Euro to rally on the back of that.
What is your forecast for EUR/USD for the end of the year?
For the end of this year we expect EUR/USD to push higher from here. Our end-year target is 1.32, though I think that would be a peak in the EUR/USD cycle for the next two to three months. I think the risks are on the upside.
What do you expect from EUR/JPY and EUR/AUD?
We have a rather mixed picture. We are still positive on the Yen. We think EUR/JPY probably falls back with USD/JPY in particular from the top of its range at the moment. We also have a rather optimistic view on the Australian Dollar. If you look at the range of crosses, it will be a less clear-cut and a more mixed picture than just looking at EUR/USD in isolation.