Forex Flash: Political risks looming on European horizon – Deutsche Bank

The weekend news flow served as a timely reminder of the political risks looming on the European horizon. In Spain, Prime Minister Rajoy sought to assure the public after the newspaper El Pais alleged that the PM had benefited from illegal cash payments from a fund operated by a former treasurer. Rajoy emphatically denied the reports and pledged to provide "complete transparency" over his financial dealings.

Nevertheless, the allegations come at a time when an opinion polls show ebbing support for his party. A poll published at the same newspaper showed that support for Rajoy's People's Party had declined to 23.9% in February, from 29.8% last month, the lowest in the party's history. Indeed, “polls suggest that neither of the two big parties would win a clear majority should an election be held in the short-term.” suggests the Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank.