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Euro hit by political uncertainty
Published on 02.10.2017 15:46

The Euro looks set for a week of volatility after a referendum over the weekend by the Catalonian government in Spain where voters overwhelmingly voted to break away from Spain.

With over 40 percent voter turnout and 90 percent declaring a ‘Yes’ vote for independence, Carles Puigdemont, Catalonia’s regional leader has promised to present the results to parliament ASAP, which would then move forward with steps to grant the voters there wish of independence.

The Prime Minister of Spain and the central government from Madrid are not going to take the results lying down, and have declared the result illegal, while promising tougher action against Catalonia.

This is one of Spain’s biggest political crisis in decades and the longer it drags out, the worse for the Euro it is expected ted to be,

“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” said Hussein Sayed, chief market strategist at FXTM.

“This will lead to more violence and probably an intervention from EU leaders, who will come under pressure to take action,” he added.

Spain is now one of a number of European countries where political unrest has been brewing for some time with another being Italy, and with elections just around the corner, it may be more added woes for the Euro.


“Noise around Catalan independence is likely to keep the euro on the back foot and risks fueling a deeper technical correction , especially with the spectra of the possibly more contentious Italian elections looming in early 2018.” says Viraj Patel at ING.


Andrew Masters

Analyst

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