Equities remain buoyed, listen to the market for answers on Greece, Australian dollar lower, ASX futures up 13

As discussed on Friday, the European Central Bank's move to support the European economy last week emerged with a bit of a caveat, being that the Greek election would pass before more detail would be offered. As polling predicted during the lead-up to Sunday's legislative election in Greece, the Syriza political party was the victor and their mandate by which they were voted in was to quit the austerity measures that the previous party embarked on, being a condition set by the European Union in order to provide funding support. This doesn't automatically mean that the Syriza party will default on its debt repayments and exit the Eurozone, and this is made evident when you examine Greek bond yields.

Greek bond yields, reflecting the risk of Greece defaulting on the timing and/or value of its interest and principle repayments on government debt, were not particularly low leading into the election - they've been north of 10.5% at points throughout January 2015. But at the same time, they're not behaving as though the country is about to commit to a bond default event that would significantly punish its creditors, which would indicate to me that the market is betting that the new government, its various investors/creditors and the European Central Bank will work together to avoid disaster. And why is this likely? Greece has just elected a party that will commit to tax cuts and more public spending - it's going to need outside investors. To prove itself as economically hostile toward foreign investors would send its economy back to the stone age - there's just nowhere near enough domestic economy demand to pursue an isolationist economic policy. 

On the back of all of this, the EURUSD currency pair (see first chart) pushed lower toward US dollar parity, hitting lows of US$1.11; however, it seems to be clawing its way back higher and this is another sign that investors and traders understand that the ECB is in a position to support peripheral European bond markets even if there is a rocky road ahead politically and economically for Greece.

To the Aussie dollar and today's second chart, recent increases in expectations of an Australian Reserve Bank cut in rates is putting downward pressure on the AUDUSD pair. Last week, expectations of a February rate cut from 2.50% to 2.25% increased from 16% to 34% - something that makes the Australian currency less attractive on interest rate expectation differential terms when compared with the US dollar. It seems as though Reserve Bank Governor Glenn Stevens is getting what he wished for - his view that the AUDUSD pair should be trading at US$0.75 is coming to fruition. But don't fall into the trap of thinking 75c will be its final destination, the US dollar strengthening trend is showing no signs of abating and it would be wise to consider the trend one's friend - this goes for the AUDUSD, US dollar index, EURUSD and European equities.

Aussie equities have a good lead this morning, but if you look at today's Global Markets matrix you'll see that iron ore is looking soft. While all US dollar denominated commodities are facing pressure from a strengthening US dollar given they're all trading against it, iron ore's drop to US$63.50 is a bummer. As the green at the top of the matrix indicate, however, as a whole equities remain the asset class of choice for investors; and as low interest rates persist, so too does the quest for income - I think 2015 will be a year that will ultimately continue to support most developed equity markets.

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: UK GDP will print at 8:30pm, US consumer confidence out at 2am, all Sydney time.

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