The waiting game
We must, once again, wait until Thursday for the latest twist in the Catalan situation. While the Spanish state has enacted Article 155 that allows them to take control of the secessionist region of Catalonia, senators still have to vote on it today and it still needs to actually take place. Catalans are apparently looking to form human shields to prevent Spanish forces entering key buildings; the euro will not react well to mass arrests, protests and running street battles between police and protesters.
In the meantime, PMIs from across the Eurozone have fared well. They’ve shown that despite political struggles on the Iberian peninsula, economic growth is still roaring in Germany, France and the wider Eurozone. As has been the case for the past few sessions though, the euro’s been relatively stable as we wait for the ECB meeting on Thursday to drive the single currency.
The song remains the same
Prime Minister Theresa May signalled yesterday that her government would not begin to negotiate on the plans for a transitional deal with the EU until talks on a trade deal also begin. Updating the Commons yesterday following last week’s European Council meeting the PM said “an implementation period is about a period which is adjusting to the future relationship. That’s the basis on which I put it forward to the European Union, and that’s the basis on which we’ll be negotiating an agreement on it.”
Sterling did not react at all to yesterday’s CBI Business Confidence Indicator which showed that industrial confidence in the UK had fallen to the lowest level since July 2016. Total orders also fell to -2 from 7 in the previous month.
Kiwi extends losses to touch a six-month low
The kiwi dollar had a quiet weekend but has had a particularly volatile Tuesday, reacting to a speech by new PM Ardern. Initially, the currency swelled after the new PM promised a significant increase in the minimum wage but then erased those gains and continued to fall as she referenced a decision to review and reform the Reserve Bank of New Zealand. Any decision to tamper with the independence of the NZ central bank will be viewed very negatively by markets.
The day ahead
The dollar’s been quiet since the beginning of the week as the market watches news surrounding tax, Trump and Fed leadership. Later today, services and manufacturing PMI numbers are due, with the Richmond Fed Manufacturing Index and New Zealand’s labor market report, Australian inflation and UK GDP figures in the evening/overnight.
Have a great day.