It’s not been a good quarter for European markets, posting fairly hefty falls, after a spectacular start to the year but they still remain in positive territory for the year, unlike the FTSE100, which has continued to be hampered by lower commodity prices. As we head into Q3 the concerns about Greece still remain front and centre as they did at the beginning of Q2, and it was no surprise to see Greece fall into arrears with the IMF as yesterday’s deadline of the €1.5bn bundled payment for June came and went. It was also no surprise to see further jawboning from politicians on both sides of the negotiating table continuing to lay out their respective positions ahead of this weekend’s proposed Greece referendum. There did appear to be some movement on the part of the Greek government to try and move negotiations in a slightly different direction, with a proposal for a new bailout in the form of a new 2 year €29bn loan from the ESM. Alongside this the Greek government has also presented some new reform proposals which the Eurogroup of finance ministers are expected to look over later this morning. Some have suggested that the moves by the Greek government suggest that they could lose this weekend’s referendum, which rather misses the point that there won’t be any winners from this vote. Irrespective of the outcome of the vote, if it happens, due to monumental incompetence on all sides the Greece people will have to vote for a choice of debt enslavement over decades, or a sudden sharp spiral into default, neither of which is particularly appealing. Also later today the European Central Bank will meet to assess the latest ELA arrangements which could well be tightened in light of yesterday’s non-payment to the IMF. While it is not expected that the ECB will end the program, they could well raise the collateral haircuts, in exchange for emergency funding. There is a risk that this might place more strain on the weaker members of the Greek banking system and tip some of the weaker banks over the edge, leaving the ECB open to the accusation of further asphyxiating liquidity as well as political interference, which leaves it in a tricky position, and suggests that they will probably err on the side of caution and do nothing. As guardian of financial stability the sensible option would be to do nothing, despite further ratings agency downgrades for Greece last night, this time from Fitch to one rank above default. On the data front we look set to get further snapshots of manufacturing PMI economic activity from the euro area specifically from Spain, Italy, France and Germany for June. Spain is expected to continue to outperform at 55.6, while Italy is also expected to show some robust activity at 54.4. France remains the elephant in the room at 50.5, still weak but at a 14 month high. Germany is also looking a little soft at 51.9. In the UK the manufacturing sector underwent a soft patch in April just prior to the election but is expected to continue to pick up with an improvement to 52.6 in June, from 52 in May. With expectations rising of a possible US rate rise in September the last thing investors will have wanted to see yesterday as Chicago PMI showing a contraction for the fourth month in five. In days past there used to be a fair correlation between Chicago PMI’s and ISM manufacturing numbers, but that appears to have gone by the by in recent times. Today’s ISM manufacturing survey for June is expected to improve to 53.2 from 52.8, while the latest ADP employment report is expected to show 219k jobs added for June, up from 201k in May. EURUSD – a very short lived move to 1.0960 early Monday has seen the euro rebound strongly suggesting that there is more life in the current rebound off the recent lows than originally thought. The failure to hold below the 50 and 100 day MA suggests we could see a move back towards the recent highs above 1.1400, but we could slip back to 1.1050 first. GBPUSD – continues to find support around the 1.5680 level, with only a break targeting a move lower towards trend line support at 1.5465, from the 1.4565 lows. We need to get back through 1.5820 to stabilise. EURGBP – after the strong rally on Monday to 0.7160, we’ve given up some ground but while we stay above 0.7070 then the prospect of move back to this week’s high remains a possibility. Monday’s key day reversal 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. USDJPY – the next support sits at 121.80 with gap resistance at 123.30 from Friday’s close. We need to push above 124.50 to suggest a return towards the 125.85 highs. A break below 121.80 suggests further losses towards 120.85. CMC Markets is an execution only service provider. 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