The euro makes gains following New Democracy win at Greek elections

The euro currency opens Monday’s session making gains following a win for the New Democracy party in Greek elections yesterday which saw the Syriza party pushed into second place as Angela Merkel tells election victor Samaras she is confident Greece will abide by bailout pledges.

It’s going to be another topsy turvy week for the euro as the currency jumped to a one month high and Asian shares rose nearly 2 percent this morning after Greece’s election delivered a slim parliamentary majority to the pro bailout party.

Rally May Not Last Long

Market players cautioned there were still plenty of hurdles ahead and the initial positive market reaction to the Greek elections could prove to be short-lived.

“I’m not sure the rally is going to last long,” said Dominic Schnider, executive director for wealth management research at UBS. “The problems are still there, you still have huge fiscal issues and it’s not just Greece, it’s Spain and others.”

The euro was up around 0.6 percent just above $1.27, having climbed as far as $1.2748, whilst the shared currency was up 0.6 percent on UK sterling. The US Dollar Index fell 0.3 percent.

While there is scepticism in the market over the euro zone’s ability to take effective steps to deal with the debt crisis that is now threatening Spain and Italy, massive speculative bets built against Europe’s shared currency could mean a good chance of further short covering by traders and investors.

“This election results should keep hopes alive that Greece will stay in the euro,” said Taisuke Tanaka, chief FX strategist at Deutsche Securities.

“There are massive short positions on the euro. Market players now need to consider whether the euro has more downside or upside, ahead of euro zone policy makers meetings in coming days. I think risk currencies could recover some of their lost grounds,” he added.

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The euro makes gains following New Democracy win at Greek elections