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October 2017

Growing tensions in Catalonia limiting Euro

Published: Thursday 05 October 2017

  • Growing tensions in Catalonia limiting Euro
  • Sterling strengthens slightly with better than expected service section data
  • Awaited European Central Bank minutes
By Charlie Horsley
Last night was a quiet overnight trading session, with most currencies fairly muted. 
The US Dollar traded slightly firmer early this morning as Asian markets began trading, but there is still no follow through buying in listless trading. The US Dollar is still limited below key near term resistance levels against the Swiss Franc, Japanese Yen and Australian Dollar.

The Australian Dollar trades a little lower today after disappointing retail sales that contracted -0.6% m/m in August, much worse than the expectation of 0.3% m/m rise. That's also the steepest decline in more than four years. However, while the Australian Dollar trades mildly softer after weak retail sales, it's staying as the strongest currency of the week so far.

The Euro is attempting a rebound, but the strength is limited by growing tensions in Catalonia.

Catalonian leader Carles Puigdemont accused King Felipe of Spain of endorsing the "catastrophic" policies of Spanish Prime Minister Mariano Rajoy. He said King Felipe "has disappointed a lot of Catalans". But he also emphasised that "this moment requires mediation". But such calls have so far fallen on deaf ears. It is an ongoing situation that will affect the Euro moving forward. We await European Central Bank (ECB) minutes this afternoon from the September meeting. Markets are hoping for clarity on the committee’s views on any potential tapering later this month. Mr Draghi has already stated that the bulk of the decisions will be made in October, although traders will be looking for clues as to what that may actually look like.

Sterling rose initially yesterday on the back of better than expected Service Sector Purchasing Managers’ Index (PMI) data, which bucked the negative trend following slightly disappointing manufacturing and unsettling construction results. The index rose to 53.6 from 53.2 last  month. Although the headline figure was positive, the underlying detail of the report points to difficult times ahead, with slow business to business sales and delayed capital expenditure due to Brexit related uncertainty. Costs are also rising, putting pressure on retailers and consumers alike. The Pound may struggle to rally in a meaningful way in this environment.

Looking ahead, we have Swiss Consumer Price Index (CPI) results in the European trading session today, while the Eurozone will release retail PMI figures and the minutes of the September meteing. The US will release jobless claims, trade balance and factory orders data later in the day. Canada will release their trade balance, too.
I scared the postman today by going to the door completely naked.
I’m not sure what freaked him out more – me being naked or the fact that I knew where he lived.

Today's major economic releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Retail Purchasing Managers' Index 50.8 50.8
EUR 12:30 European Central Bank Monetary Policy Meeting Accounts    
CAD 13:30 Canada: Trade Balance -3.0b -2.6b
USD 13:30 US: Unemployment Claims 272k 266k
USD 13:30 US: Trade Balance -43.7b -42.7b
USD 14:10 Federal Open Market Committee Member Powell Speaks    
USD 15:00 Federal Open Market Committee Member Harker Speaks    
USD 15:00 US: Factory Orders -3.3% 1.0%

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news