Pro-Bailout Politicians Win in Greece; Euro Down Anyway

Even though pro-bailout politicians won in the Greek elections over the weekend, the euro is heading lower against its major counterparts. Relief over the outcome in Greece gave the euro a boost earlier, but that quickly gave way as the spotlight turned to shine on Italy and Spain.

Now that the Greek situation looks to be largely resolved, and many expect that the conservative majority politicians will be able to form a government, Forex traders and others are turning their attention to Italy and Spain. Concerns about the abilities of those countries to manage their debt are rising. Recent bailouts of Spanish banks, including the largest, Bankia, have prompted concerns about the entire eurozone financial system. Additionally, concerns about Italy’s economy and sovereign debt have also been on the rise.
Bond yields in Spain and Italy have been quite high, and there are plenty of concerns about what happens next. Euro is dropping against other major currencies as risk aversion returns to the market, and as uncertainty over what’s next for the eurozone economy drives the 17-nation currency lower.
At 13:30 GMT EUR/USD is lower at 1.2591, down from the open at 1.2697. EUR/GBP is lower at 0.8046, down from the open at 0.8082. EUR/JPY is down to 99.3340 from the open at 100.0565.

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