Catalan chaos

10th October 2017 Market Update

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🇬🇧 GBP – Sterling bounced back a little yesterday following a week of unprecedented downward pressure. It is difficult to dissect the reason behind the pound’s strength, however this was probably caused by Boris Johnson’s reaction to “so called friends trying to undermine the PM”.

Industrial and manufacturing production figures for the UK will be released this morning. Industrial figures are expected to remain at current levels while manufacturing figures are expected to drop slightly. NIESR is expected to release their September GDP estimate, however there are no forecasts for this.

🇪🇺 EUR – Industrial production yesterday smashed all estimates which saw the euro strengthen across the board except against Sterling. Today there is very little economic data from the Eurozone, with the only data of note the German trade balance which came in above expectations this morning.

The much bigger news is the Catalan independence crisis. There is a chance that Carles Puigdemont (Catalan regional president) could announce independence from Spain today after he addresses the Catalan parliament this evening. Although the move has been called symbolic and Spanish authorities have been called on to act, it is hard to predict an outcome for tomorrow morning. The uncertainty around the situation could worsen which would likely affect the euro negatively.

🇺🇸 USD – There was little data for the greenback yesterday on Columbus Day. As a result, the currency dropped slightly against the euro and Sterling, however it held position against most other currencies.

Today two business optimism reports are due which are unlikely to have a significant influence on market movement. FOMC member Kashkari is expected to speak later and any hints on the US interest rate outlook will be key.


Key Announcements

🇬🇧 GBP
09:30am – Manufacturing production – expected to fall to 0.2% from 0.5%
09:30am – Industrial production – expected to remain at 0.2%
13:00pm – NIESR GDP estimate – last time was 0.4%

🇪🇺 EUR
Tentative – Catalan Independence announcement

🇺🇸 USD
14:00pm – FOMC Kashkari speech


Our View: Sterling remains in its current void, with Brexit negotiations still stalling and the “no deal” option becoming a real possibility, positive signs from Boris Johnson helped yesterday but the reality is the outlook is still poor for the pound until a deal or plan is agreed. This could be overlooked this week with the Catalan situation in Europe which could boost the pound.


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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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