The triggers for yesterday’s sharp declines in European markets appear to have been triggered by a combination of sliding commodity prices, disorderly declines in Chinese stock markets, and a growing realisation that Greece may be on a slow road to default and an exit from the single currency. This perception quickly shifted soon after the European close, pulling US markets sharply off their lows, on reports that EU officials were weighing up a short term funding deal for Greece to meet its obligations for this month. This, in spite of the failure of Greek officials to submit any form of significant new written proposals at yesterday’s Eurogroup meeting in Brussels. Any funding deal would be dependent on the Greek government submitting a loan application to the ESM later today for a 2 year deal, as well as commitments to a reform package, and prior actions, by Thursday, not dissimilar to the deal rejected in last Sunday’s referendum vote, in the hope that something can then be agreed in time for another big EU make or break summit meeting on Sunday. The issue of debt relief is not expected to be on the table, which doesn’t bode well for a successful outcome, particularly given that any deal on offer is likely to be much harsher than the one on offer last weekend, if last night’s comments from German Chancellor Angela Merkel are any guide. This also goes against the wishes of the IMF who have publicly stated that debt relief should be on the table Whether this is yet another false dawn only time will tell as we venture further into the realms of farce, but as we look ahead to yet another can kick, and another disappointment, I can hear the words of the song “let’s go round again, maybe we’ll turn back the hands of time” repeating over and over in my head, as Greece slowly heads towards the euro exit door. Chinese stock markets have also endured a turbulent time in recent days, despite attempts from Chinese authorities to add liquidity to avert the slide. The extent of the volatility has seen well over 40% of stocks on the indexes suspended, with the prospect of more to come. This rout in Chinese markets appears to have spilled over into commodity markets with copper, iron ore and oil prices all coming under heavy pressure. Also on the agenda later today we have a special UK summer budget which has been deemed unnecessary in some quarters, coming so soon after the one in March, but it matters in the context of the Government's fiscal priorities over the next five years. Since 2010 the Conservatives have been encumbered by the restraining influences of their coalition partners, the Liberal Democrats, and the recent May vote now means the Conservatives can now go about setting the scene for the next five years, and their vision for the UK economy, against a backdrop of the fiscal crisis in Greece and Europe as a whole. In the budget today Chancellor Osborne will need to walk a fine line of keeping the economy growing at a decent rate, while at the same time cutting back sharply on the incessant rise in public spending, and in particular on in-work benefits which continue to divert resources from more critical areas. Of particular interest to the City will be any changes to the bank levy, as well as further detail on how the government will go about selling down its remaining stakes in RBS and Lloyds Banking Group Finally on another content heavy day we get the copy of the most recent FOMC minutes, and apart from Fed policymaker’s views on the US economy, investors will be looking for clues as to any concerns Fed officials have about events in Europe and China, as well as concerns about the strength of the US dollar. At the last press conference Janet Yellen expressed concerns about a lack of wage growth and given recent data it will be interesting to note if any other members share those concerns. Given recent events though you have to wonder whether or not the minutes may not be a little dated. EURUSD – yesterday’s break below 1.0960 to 1.0915 has seen the euro rebound but we need to get back through 1.1070 to suggest a return to 1.1200. While below 1.1070 the risk remains for a move towards 1.0820 and the May lows. GBPUSD – we’ve broken lower, below 1.5520 and the trend line from the 1.4565 lows which suggests we could well see further declines towards the 200 day MA at 1.5270. We need to get back above 1.5530 and the 50 day MA to stabilise and argue for a move back towards 1.5820. EURGBP – finding some support at the 0.7060 level the key day reversal last week does suggest scope for further downside could be limited. Only a break below 0.7000 could well open up the 0.6920, the November 2007 lows. Resistance comes in at 0.7160. USDJPY – the support at the 121.70/80 area remains a key level, a break of which could see a move towards 120.85. There is trend line resistance at 123.40, which comes in from the 125.85 highs. We need to push above 124.50 to suggest a return towards the 125.85 highs. CMC Markets is an execution only service provider. 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