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The Catalan independence vote has Spanish investors nervous
Catalonia goes to the polls on September 27. Although efforts to hold a referendum on independence was stymied by Madrid, many partisans are claiming the weekend election is precisely such a referendum. Even if this is not legally true, a victory by a coalition of those seeking independence would intensify the confrontation with the federal government, ahead of the national elections that will be held later this year.
The leading independent coalition (Junta pel Si--Together for Yes) has promised a Catalan state within 18 months of the election. Although this seems far-fetched, it illustrates likely pressures that will mount. The polls show this coalition winning around 40% of the vote, but just shy of a the 68 seats needed to secure a parliamentary majority. There are other parties who favor independence but did not join the Junta pel Si that could form a coalition.
Catalonia has long sought greater independence. It is an economically prosperous region that is a net contributor via fiscal transfers to other regions in Spain. It accounts for roughly 20% of Spanish GDP and has a substantial (~5%) budget surplus.
However, despite what the protagonists are saying, only about a fifth of Catalans identify independence as the most important issue. About three-fifths say the economy is the most important issue. Overall, polls suggest about 40% favor independence. Moreover, the federal government, the central bank, other EU members, and even the football league, warns of a heavy price of secession. To discourage other regions from breaking away from their countries, an independent Catalonia would not be an EU or EMU member.
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breaking 1.1100 will not be an easy task for EUR/USD have a great weekend.
EUR/USD: Dollar Supported by Fed's Verbal Activity
Following the Federal Reserve (Fed) induced sell-off of the US dollar last week, the greenback managed to recover during the week ending September 25 with the help of verbal activity from Fed members.
The euro fell 0.95% over the week, ending at $1.1192 against the US dollar, as raft of Fed policymakers - including Richmond Fed President Jeffrey Lacker, Atlanta Fed chief Dennis Lockhart, St Louis Fed President James Bullard and Fed Chair Janet Yellen - indicated that tighter monetary policy is still on the cards this year.
At the same time, European Central Bank President Mario Draghi reiterated the bank's readiness to act should the currently heightened downside risks to inflation materialize. While speaking to the European parliament on Wednesday, Draghi hinted about the further extension of the asset purchasing program.
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EUR/USD forecast for the week of September 28, 2015
The EUR/USD pair fell initially during the course of the week, but found enough support below the 1.12 level to turn things back around and form a bit of a hammer. With that, the market should try to get back to the 1.15 handle, but that is close enough that it keeps us away from buying this market from a longer-term perspective. If we can get above there though, we feel that this market will then be very bullish and should continue to go much higher. We have no interest in selling.
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EUR/USD Forecast Sep. 28 – Oct. 2
EUR/USD had an exciting week, rising to high ground but falling back to the drawing board. Inflation figures and final PMIs are the highlights this week. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The ECB does not seem to be in a rush to introduce more QE, and this gave a boost to the euro. French manufacturing finally returned to growth territory and also German business confidence surprised to the upside. But not all is rosy in the old continent, with uncertainty around Greece always in the background. In the US, some unimpressive figures weighed on the dollar, but Yellen surprised with a relatively hawkish speech, powering the greenback back to form.
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EUR/USD Outlook: All Eyes on Payrolls for Further Direction
The greenback ended the week higher, however it lacks the momentum to move further higher and preferably toward the $1.10 mark in the coming days.
US GDP for the second quarter improved from 0.6% in Q1 to 3.9%, according to the third estimate, the Bureau of Economic Analysis advised on Friday. The greenback failed to appreciate after these results, as GDP is a lagging indicator, and also suggests some cautious trading ahead of next week's data is in place.
"In short, GDP growth was quite strong in Q2, albeit helped by catch-up after a weak 0.6% pace in Q1. The trend is probably somewhere in the middle. The core PCE price index was revised to up at a 1.9% annual rate from 1.8%; the overall price index was unrevised at up 2.1%," Jim O'Sullivan, chief US economist at High Frequency Economics wrote on Friday.
During the next week, macro news will include consumer confidence, the ADP report, the ISM's manufacturing PMI and more importantly, the unemployment rate along with non-farm payrolls. The unemployment rate for September should remain at 5.1%, while payrolls should improve from 173,000 to 200,000.
From the euro point of view, German CPI for September are due, along with retail sales for Germany and Spain and labor data from various countries in the currency bloc. Moreover, manufacturing PMIs for several nations and the euro zone as a whole will be released as well.
Volatility should be higher during the week as it offers plenty of macro news from both sides of the Atlantic, but most investors will focus solely on the payrolls.
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breaking 1.1100 will not be an easy task for EUR/USD have a great weekend.
Does not look that it will go there soon
EUR/USD: Euro Bearish at Daily Lows, Fed Speakers Eyed
The euro declined shortly after the opening bell on Monday as bears took control. With no major European data in sight, markets will once again switch focus to the US shift.
The euro declined below $1.12 awas trading down 0.10% to $1.1180 on Monday, hovering near daily lows.
Last week, Federal Reserve (Fed) Chair Yellen highlighted that her preference was for tightening this year and St Louis Fed President Bullard stated over the weekend that he'd "like to get going" on raising rates. Kansas City Fed President Esther George also supported the lift-off theme over the weekend.
Although Yellen's comments were seen as rather dovish, they appear to have reassured some nervous investors, despite not acting in September, by putting the prospect of a rate rise back on the table by the end of this year.
The US Fed will remain in the headlines over the week with a further nine Fed speakers scheduled, including Chair Janet Yellen again, while the all-important non-farm payrolls report is due on Friday.
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On Friday session the EURUSD initially fell but found enough buying pressure to turn around and close in the green near the high of the day with a narrow range.
Since 23rd of September the pair managed to close above the 50-day moving average signs of bull strength. EURUSD is being squeezed by the 50-day moving average (on the bottom) and the 10-day moving average (on the top) a break to either side will set the trend for the following days.
The key levels to watch today are 1.1237 (resistance), the 10-day moving average at 1.1226 (resistance), the 50-day moving average at 1.1184 and the 1.1097 daily support (Support).
Economic recovery in Europe is on track says Germany
Deputy fin min Spahn on Bloomberg
When it comes to rules, the German's wouldn't give an inch of wiggle room
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