Good morning,

The horrors of the news coming from Las Vegas over the last 24 hours can render the movements of foreign exchange markets – and updates like this – to be pointless and unimportant. As with every other day, we will continue to write about markets and global politics today because the markets do not stop. But, we will also take time to pay our respects to those suffering in Nevada.

Euro hurt by pictures of Catalan unrest

The results of the Catalan referendum were always going to show that the region would vote for independence. It is the violence that broke out and the belief that Catalonia could easily declare independence from the Spanish state by the end of this week that were the surprises from this weekend in Spain.

The vote will now go to the Catalan parliament and the region could unilaterally declare itself independent. This would take Spain into murky waters not seen since the Civil War. Electoral and referendum risk was almost done for in the Eurozone after Emmanuel Macron’s win in France but, as we have found in the UK and the US, political risk can whip up almost instantaneously.

The euro will be used as a barometer of this risk this week and while the run of PMI data from the Eurozone this week could easily be strong, political risks will likely trump economic data.

UK’s Conservatives to outline long-term plan for government

The Conservative Party Conference takes place this week in the UK. The media is full of rumours and speculation that the Prime Minister is under pressure from some within her cabinet to resign while also unveiling a plan to persuade young voters to vote for the Tories. Brexit is the be all and end all of the Tory party conference and speeches from the Chancellor, Foreign Secretary, Secretary for Exiting the EU and the Prime Minister will be scoured for hints and clues on new Brexit policy.

People’s Bank of China combat slowing lending

The People’s Bank of China cut its reserve requirement ratio (RRR) on Saturday by at least 0.5ppts for some banks, reducing the amount of cash that banks must hold as reserves from next year. The aim is to allow credit to an area of the economy that has traditionally found credit hard to come by whilst ensuring that the bubbles seen in some areas do not pop. This allowed the USD/CNH rate to climb overnight – which remains the case this morning.

The day ahead

The calendar for the rest of the session is busy for a Monday – US manufacturing PMI, construction spending numbers and the ISM manufacturing report all due ahead of a speech from FOMC member Kaplan at lunchtime.

Have a great day.