When looking back on the month of May it is surprising how little has changed from a month ago. We’re still talking about Greece and we’re still talking about the timing of a Fed rate rise. The only thing that we aren’t talking about is uncertainty surrounding the flavour of the next UK government which was resolved quite conclusively with the election of a Conservative government for the next five years, albeit with a slim majority. This also helps explain why the FTSE250 has outperformed other European indices this month as it continues to break records, unlike the FTSE100 which has been unable to get above its previous record highs. While other European markets have performed fairly well, progress has been difficult, as well as choppy, and been helped somewhat by ECB intervention in the context of promises to front load its QE program. Greece continues to hold the markets attention, with a certain amount of headline fatigue setting in. In fact you could copy and paste any headline from the last five years and see that not much has changed in the context of the debate about Greece’s finances. Will we get a deal by Sunday as claimed by Greek officials, or are the parties still some way apart. Deadlines come and go and the next one is the 5th June and an IMF payment of €300m. More to the point whose red lines will remain intact or will we get some form of default? Certainly the mood music and the tone has changed in recent days with more officials from the EU as well as the IMF reportedly speculating about the prospect of a Greek default and exit, rhetoric which would have been unthinkable a few months ago. With time running short it has been mooted that next week’s IMF June payment might get rolled up into one single payment later in June to buy more time, something that Greece hasn’t yet asked for, though it’s not clear what the market reaction would be if that were to happen. It is also becoming clear that the IMF is determined that some form of write-downs may have to occur for Greece’s debt to become sustainable, which isn’t likely to go down well with EU officials. This week’s economic data from the US has shifted the focus back on to the timing of when the Federal Reserve is likely to start raising interest rates, particularly in light of Janet Yellen’s remarks last Friday that she expected rates to rise this year, and that the recent slowdown seen in Q1 is likely to be transitory, though some of the recent data seen from April does throw some elements of doubt into that belief. What remains quite clear though is that the Fed remains worried about the global economy, and any spill over effect from the slowdown in China. It is also clear that US Treasury officials remain concerned about events in Europe, and particularly Greece with respect to a messy outcome ahead of the scheduled 5th June repayment to the IMF. Today’s US Q1 GDP downward revisions are expected to underscore the weakness seen at the beginning of this year with a downgrade from the 0.2% miss seen at the end of last month to -0.8%. This is a far cry from what markets had been expecting just over a month ago when we were hoping to see growth of 1%, amidst expectations of possible June rate rise. It’s also well below the 2.2% expansion seen in Q4, and thus far in May and well into Q2 market expectations of a sharp bounce back still haven’t been completely fulfilled, though we have seen some signs of a slight pickup in consumer spending. Irrespective of today's downward revision of Q1 GDP investors are likely to be much more focussed on the resilience of next week’s payrolls and ISM data for May, given recent weaknesses in both these data sets. The three month average for jobs growth slipped below 200k for the first time in 12 months last month after we saw downward revisions to previous months. The latest Chicago PMI data for May is also expected to show a modest pick-up to 53 from 52.3 in April, as the residual effects of the West Coast ports strike continue to subside. EURUSD – having posted a new low of 1.0820 dropping briefly below the 1.0845 61.8% retracement level the euro continues to remain under pressure. A move through here argues for further losses towards 1.0745. We need a move back above the 1.1050 level to stabilise and argue for a move back towards 1.1220. GBPUSD – the pound continues to drift lower, closing in on the 1.5190/5200 area, which is likely to be a key support area. We need to rebound back above the 1.5440/50 level to stabilise. EURGBP – the rebound seen in the past couple of days suggests we could see a rebound but we need to push back above 0.7170 to target a return to 0.7230. The March lows at 0.7015, remain a key support. USDJPY – having broken above the 2007 highs at 124.20 the US dollar continues to look well supported, as it looks to close in on the 125.65 level, which we last saw in December 2002. Support remains down at 122.00, the previous highs, as well as the recent range lows between 118.30 and 118.65. 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.