The Euro concluded Fridays trading with what was a week to forget. The single currency slipped as much this week as it has at any point this year. It’s decline in value saw EUR/USD conclude trading at 1.1608 on Friday and GBP/EUR break through the 1.13 comfortably.
The Catalan government officially declared their independence following their referendum which although poorly attended showed a majority that leant towards independence.
The Catalan independence party did seek mediation in order to negotiate their position; a request which was strongly rejected by Mario Rajoy the Spanish Prime minister, who has since taken back control of the region, dissolving the Catalan government and sacking the chief of police.
This controversy has sparked mass demonstrations in both Madrid and Barcelona with both pro and against independence rallies taking place.
Since dissolving the Catalan regional government Rajoy has announced regional elections will be held on 21 December.
Following the actions taken by both the Catalonian regional government and Madrid, the demonstrations have been rife in the region highlighting the divisions the in area. Carles Puigdemont the displaced President of Catalonia has called for ‘Peaceful opposition’ which up to now has been followed.
Sunday has seen in excess of 300,000 pro unity demonstrators flood the streets of Barcelona, many of which have attended a speech by Josep Borell. In which he urged the regions pro unity supporters to vote in mass on 21 December in order to release the Independence party’s grip on the region.
Following Carles Puigdemont’s official declaration of independence, the news with met by many leaders with many global leaders refusing to acknowledge the regions autonomy.
Theresa May’s official spokesman stated regarding Catalonia’s independence:
The UK does not and will not recognise the unilateral declaration of independence made by the Catalan regional Parliament.
Whilst the French President Emmanuel Macron pledged his full support to Prime minister Rajoy.
Angela Merkel’s official Spokesman had a similar message
The (German) federal government does not recognise such an independence declaration.
The Catalan declaration of independence added to EUR/USD pressures and attributed to the worst EUR/USD weekly decline of 2017. Prompting fresh uncertainty in the EU. The Euro had come under pressure following The ECB’s Press conference and Catalonian tensions will have only added to its decline. The weekly high for the EUR/USD was 1.1833 the pair not sit at 1.1645.
The Pound also benefited from the regional issues in Spain allowing the GBP/EUR to punch its way to a high of 1.1325 on Friday. Sterling has continued to benefit both from Spanish uncertainty but also the upcoming interest rate decision. Many investors are now all but certain that the Bank of England will raise Interest rates, however many seem more upbeat following the UK’s better than expected Preliminary GDP figures and Average earnings data and any mention of other potential rate hikes will surely fuel the Pound.