The euro was on the rise on Thursday as investors awaited a key deadline in the running crisis between Spain and Catalonia over independence for the rich northeastern region. Meanwhile, the dollar continued to fall.
Where currencies are trading
The ICE U.S. Dollar Index, which gauges the dollar against six other currencies, eased 0.04% at 93.320. The WSJ Dollar Index, a measure of the greenback against a broader basket of 16 rivals, fell 0.05% to 86.71.
The euro moved higher against the dollar to $1.1811, compared with $1.1787 late Wednesday.
Against the yen the dollar fetched ¥112.92 versus ¥112.92 late Wednesday.
The British pound was buying $1.3193, compared with $1.3204 late Wednesday in New York.
The greenback eased against the Swiss franc, falling to 0.9798 francs from 0.9817 francs.
What’s driving the market?
The Spanish government has given the Catalan government, led by President Carles Puigdemont, until 10 a.m. local time, or 4 a.m. Eastern Time on Thursday to pull back from its push for independence. If Puigdemont doesn’t do so, Madrid has threatened to invoke an article of the Spanish constitution that would allow the central government to take control of the region. There are concerns that such a step will trigger protests in the Catalan region.
Meanwhile, Catalonia could formally declare independence if the Spanish government strips it of autonomy, according to a Reuters report on Thursday. The process of rescinding that autonomy could take around three or four days, the report said.
The turmoil in Spain has been a focal point for investors trying to assess the health of the eurozone’s shared currency. Catalonia contributes a 20% chunk of the Spanish economy, therefore a breakaway of that region would present both sides with massive challenges.
The euro remains 12% higher against the dollar on a year-to-date basis.
For sterling, investors are likely to watch a two-day European Summit meeting in Brussels. European officials are expected to say the Brexit talks have fallen short of what’s needed to allow trade negotiation talks to start, according to media reports.
For the dollar, the focus is on President Donald Trump’s search for a new Federal Reserve chief ahead of the expiration of current Chairwoman Janet Yellen’s term in February. Trump is expected to interview Yellen about potentially staying on as chief on Thursday, according to Politico and other media reports.
What analysts are saying
“I would expect to see [the euro] weaken slightly today just based on a knee-jerk reaction, but I think the effect is likely to be muted and not long lasting. If we were to see people marching in Belgium or Northern Italy with Catalonian flags shouting ‘us next#, that would be a different story. But so far it seems that the crisis is restricted to Catalonia, and even then it doesn’t seem likely to seriously impair even Spain, much less the rest of the EU. So for now, it’s only going to have a psychological effect, which I think may be temporary – unless the crisis worsens.” — Marshall Gittler, chief strategist at ACLS global
What data are in focus?
Weekly jobless claims and the Philly Fed manufacturing index for October will be released at 8:30 a.m. Eastern Time. Leading economic indicators for September are due at 10 a.m. Eastern.
In the U.K., a report on retail sales for September is due at 9:30 a.m. local time (4:30 a.m. Eastern Time).
Source: MarketWatch
