After some strong gains over the past few days both US markets and European markets both slipped back, though more than likely not predominantly for the same reasons. While the continued uncertainty surrounding Greece is no doubt a factor, US markets probably slipped back after US Q1 GDP was revised up to -0.2%, with personal consumption seeing a significant revision higher. This better than expected revision has once again shifted the markets attention back towards the Federal Reserve and the likely timing of a US rate hike, pulling stocks down from their recent highs. With permanent FOMC voting member Jerome Powell due to speak again today after his hawkish comments on Tuesday about the potential for two rate hikes this year, markets will be looking closely today at the latest PCE inflation and personal spending numbers for May, for evidence of a pickup in prices and consumer spending. Expectations are for inflation to remain benign at 1.2%, well below the Fed’s target rate of 2%, but there is an expectation that we could see a significant pick up in personal spending from 0% in April, to 0.7%. A big rise here would go some way to assuaging concerns about the reticence of US consumers to go out and spend their hard earned cash, rather than save it, which is what they have been doing this year so far. In the whole of Q1 personal spending increased by 0.3%, so it was a particularly weak quarter, while personal incomes came in at 0.7%. Weekly jobless claims are expected to rise to 271k from 267k. Meanwhile back in Europe, and the closer we get to the 30th June deadline it is becoming increasingly apparent that Greece will not be repaying the IMF its €1.5bn on time. Yesterday’s declines in equity markets were pretty much inevitable given the euphoria of earlier in the week, after the creditors not surprisingly pushed back on the proposals, so seized upon by the markets, that were put forward by the Greek government. One thing this pushback by the creditors has done is shift the focus away from the other problem of how to get the proposals passed firstly by the Greek parliament, and then by the German Bundestag, but that is likely to be a problem for another day. That being said the furore created by the original proposal doesn’t exactly bode well for the outcome of a new one, if one is agreed. While the IMF did put forward a counter proposal this was rejected by the Greeks, who remain determined to try and safeguard their pension red lines, and put a limit on the amount of red ink that the IMF wants to put across a lot of their tax raising proposals. In a nutshell the IMF want less tax rises, particularly on business, and more spending cuts, particularly around pension reform, something the Greeks are reluctant to consider. With no concrete deal on the table the divisions look as wide as ever, with another Eurogroup meeting scheduled for today, and no sign that we are any further forward than a week ago, as this game of smoke and mirrors continues. While the divisions between Greece and the creditors are one thing, it is also hard to square Germany’s insistence that the absence of the IMF in any new deal is unthinkable, when the IMF is insistent that some form of debt relief is required, something that Germany is openly opposed to. How the creditors intend to square that particular circle is anyone’s guess, given that the IMF is likely to be highly reluctant to want to participate in a third bailout. EURUSD – yesterday’s fall below 1.1200 undermines the prospect for further gains in the short term and opens up the prospect of a test of the 50 day MA at 1.1145, and key support at 1.1050, where we also have the 100 day MA. We need to get back through 1.1230 to stabilise, and argue for 1.1300. GBPUSD – the break below 1.5800 this week has shifted the focus towards a move lower towards the 1.5400 level. Initial support sits at 1.5680, but the risk remains for a test of trend line support at 1.5400, from the 1.4565 lows. We need to get back through 1.5820 to stabilise. EURGBP – having failed to break below the 0.7080 level we’ve seen a bit of a pullback, which could see us move back towards the 0.7220 area. A break below 0.7070 could well retarget the lows this year at 0.7015. USDJPY – the US dollar failed to recover the highs of last week at 124.35 and this has prompted a pullback. We need to push above 124.50 to suggest a return towards the 125.85 highs. While below 124.50 the risk remains for a return to the 122.60 lows, and then 121.80. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.