The big story over the weekend for the foreign exchange markets was the outcome of the Greek election and though the win for anti-austerity party Syriza did lead to some volatility and EUR/USD testing an 11-year low.
Tuesday, January 27, 2015
The upshot for the shared European currency on Monday has ultimately not been that bad, with a small bounce in the euro by afternoon in New York giving proceedings almost a reassuring air.
That stems from a growing sense that Syriza’s victory does not necessary spell a departure for Greece from the euro, a sense bolstered after incoming Prime Minister of Greece Alexis Tspiras said he would seek a compromise with his country’s lenders. ‘The new Greek government will be ready to co-operate and negotiate for the first time with our peers a just, mutually beneficial and viable solution,’ he said. By early afternoon in New York, the euro was 0.63% stronger on the day versus the US dollar at a rate of $1.1275 per euro, having been as low as 1.1098 earlier in the session, the weakest EUR/USD has reached since September 2003. Along with a bounce in the euro, there was a rebound in European stocks in general, with the German DAX gaining 1.4% and the French CAC 40 rising 0.7%.
US braces for winter storm
On Wall Street the situation was less positive though, stock indices largely treading water as investors wait to see how great the impact of the incoming winter storm might be on the East Coast. Severe blizzard conditions are forecast for the Northeast, with travel disruption the very least that is expected. This raises the spectre of the shock to the system delivered to the US economy at the beginning of last year by severe weather conditions that saw US GDP contract in the first quarter. The Dow Jones slipped down 9 points or 0.05% while the S&P 500 inched up 0.11% to 2054.2.
It has been a very light day in terms of domestic economic news: the Texas manufacturing outlook survey being the main release. The monthly survey from the Dallas Fed suggests manufacturing conditions in Texas are little changed this month from December, with the production index yielding a reading of just 0.7, while capacity utilization slipped to a five-month low of 5.1 and new orders fell into contractionary territory with a level of -7.7, the first negative reading since April 2013. The wider economic picture was discouraging also, with the general business activity index sliding to -4.4 from 3.5 in December, for its first sub-zero reading in 20 months.
Economic news will be coming out at a brisk pace as the week progresses: Microsoft ($MSFT) reports after the market closes on Monday and highlights for the week include consumer confidence for January on Tuesday, an announcement from the Fed following the conclusion of the FOMC meeting on Wednesday and a first look at fourth-quarter GDP on Friday.
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