Forex Flash: Calls for resignation amplified in media – BBH

Brown Brothers Harriman analysts see that concerns over Spanish politics have served as a good excuse for a bout of profit taking across markets.

The feel that the corruption allegations are just noise, and instead they note that the confidence in the Rajoy government has been eroding alongside economic stability. They see that the fourth quarter contraction was deeper than the Bank of Spain expected and news on Monday showed a huge jump in unemployment. In addition, Spain's three largest banks, Santander, BBVA and CaixaBank, announced large write downs in recent days, in part due to large real estate provisions, reminding investors of a key source of Spain's vulnerability.

Nevertheless, they feel that calls for Rajoy's resignation from opposition forces were given more credence by the financial press than they deserve. Nevertheless, the political fragility is palatable and the one thing that could bolster the government's support is not German Chancellor Merkel's best wishes, but a substantial improvement in the Spanish economy which does not look to be forthcoming for at least several months.