Shifting political sands in Europe, as shown in the weekend regional elections in Spain are a timely reminder that for all the goings on in Greece, the problems in Europe remain a much wider ranging problem. Yesterday’s sell off in European markets serves as a timely reminder that despite the recovery in the Spanish economy, politics has a nasty habit of reminding EU policymakers that away from their spreadsheets and flow charts of economic models, there is a human equation that adds an unpredictable element to all of their best laid plans. With a Spanish election coming in Q4 of this year and unemployment still at an eye wateringly high level above 20%, and youth unemployment still over 50% it seems highly improbable given last weekend’s results that the incumbent government will see any benefit in the main poll later this year, unless significant inroads are made to these numbers between now and polling day. Given that the Spanish government is already running an EU mandated budget deficit of 5.8% of GDP, well above the 3% limit, any risk that a new anti-austerity government would undermine these spending limits is unlikely to be well received in Brussels. It is against this backdrop that the Greek government is trying to renegotiate a new funding program as it looks to pay the remainder of its May salaries and wages by the end of this week, while still finding enough money to also pay the IMF the first tranche of its €300m on 5th June, out of a total of €1.6bn due to be paid at various intervals throughout June. Sentiment isn’t being helped by the foghorn diplomacy of some Greek officials threatening to withhold next week’s IMF repayment, with other officials in Athens and Berlin trying to dial down the tensions with Mr Varoufakis claiming that the 5th June payment would be made as there will be an agreement by then. US markets also suffered a sharp sell-off yesterday after some better than expected economic data reinforced expectations that we could well see a rate rise later this year from the Federal Reserve, in the process sending the US dollar to new 8 year highs against the Japanese yen, and its best levels against the euro for several weeks. While equity markets appeared concerned about the prospect of a rate rise bond markets weren’t with yields dropping sharply, hardly the actions of traders pricing in the prospect of a rate increase. With little in the way of economic data due out today Europe’s markets look set for a brief respite this morning, with a slightly higher open, albeit with a close eye on events in Europe and any prospect that the current impasse between Greece and its creditors can see cash unlocked in time for next week’s June deadline. EURUSD – the euro continues to remain under pressure pushing against the support at 1.0875, and closing in on 1.0845 61.8% retracement of the up move from 1 0460 to 1.1465. 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 – having broken through the 1.5440/50 area suggests the scope for further losses towards the 1.5200 level. We need to rebound back above the 1.5570/80 level to stabilise. EURGBP – while below the 0.7120 level the bias remains for a move towards the March lows at 0.7015. Resistance on any pullbacks is likely to be found at the 0.7120/30 area, which had been support up until last week’s break. USDJPY – having broken above the previous highs at 122.00 and the trend line resistance at 122.15 from the 1990 highs at 160.30, we look to be heading towards the 2007 highs at 124.20. 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.