The Euro came under pressure early Monday, falling more than 0.4% against the USD, after preliminary results from the weekend’s Catalonia referendum showed that 90% of Catalans are in favor of independence.

There’s a high chance that Spain may be headed towards a new crisis, especially if Catalonia’s President, Carles Puigdemont, declares independence as he has promised to do in the next 48 hours. This will lead to more violence and probably an intervention from EU leaders, who will come under pressure to take action.

Traders should be monitoring spreads between Spanish and German bond yields in the next couple of days. If spreads widen significantly, investors will become seriously worried about the outcome of the referendum vote, leading to a further selloff in the Euro, but this is not evident yet.

- advertisement -

Catalan’s referendum is not the only reason for the fall in EURUSD. In fact, the dollar is rising across the board, as the U.S. Treasury’s yield curve shifted upwards. Given that there wasn’t any new fundamental information released over the weekend, reports that former Federal Reserve Governor Kevin Warsh had met with President Trump and Treasury Secretary Steven Mnuchin, for a possible nomination to chair the Fed, is the only explanation for the shift in the yield curve. We do not yet know how Warsh would lead the Fed in the Trump Era, but given the reaction seen in bond markets, investors see him as a more hawkish candidate than Yellen.

Speculation around the Fed Chair appointment will keep fixed-income traders busy in the days to come, and currency traders will benefit from the moves in yields. However, this speculation should end, when the President announces the name of his nominee in two to three weeks.

The European economic calendar is relatively light this week. Traders will be focusing on PMI data from the U.K., the jobs reports from the U.S. and Canada, and the Reserve Bank of Australia interest rate decision. The U.S. NFP is likely to deviate hugely from this year’s average. Economists are currently anticipating a figure less than 100K. However, I do not think this will have a negative impact on the dollar, given that investors know Hurricanes Harvey and Irma will distort the data.

Fed speak will likely continue guiding traders, and Janet Yellen will again appear on Wednesday to deliver the opening remarks at the 21stCentury Conference in St. Louis. Fed officials Robert Kaplan, Jerome Powell, Patrick Harker, and Bill Dudley, are all due to speak this week.

Previous articleUSDJPY Intraday Analysis
Next articleForex: UK Output Data Falls But Expectations Rise
The FXTM brand provides international brokerage services and gives access to the global currency markets, offering trading in forex, precious metals, Share CFDs, ETF CFDs and CFDs on Commodity Futures. Trading is available via the MT4 and MT5 platforms with spreads starting from just 1.3 on Standard trading accounts and from 0.1 on ECN trading accounts. Bespoke trading support and services are provided based on each client's needs and ambitions - from novices, to experienced traders and institutional investors. ForexTime Limited is regulated by the Cyprus Securities and Exchange Commission (CySEC), with license number 185/12, licensed by South Africa's FSB with FSP number 46614, and registered with the UK FCA under reference number 600475. FT Global Limited is regulated by the International Financial Services Commission (IFSC) with license numbers IFSC/60/345/TS and IFSC/60/345/APM.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.