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All eyes are on Catalonia

The Catalan question could be answered to today, as the president of Catalonia addresses the parliament in the region.

This will be the first address since the referendum on independence was held on 1 October. Carles Puigdemont, the Catalan President, previously stated he would unilaterally declare independence within two days of winning the referendum. Since that promise wasn’t kept, traders are wondering if that was just pre-referendum bluster.

Catalonia lies in the north-east of Spain, but today it will be at the centre of Europe. Major companies are already in the process of relocating their headquarters out of the region, which will make life tough for the separatists. The Spanish government hasn’t ruled out imposing direct rule, but given its track record lately, it will need to choose its actions carefully, as such a move would surely stoke nationalist tensions.

The Catalan situation has had a major impact on the IBEX 35, while the euro has shrugged-off it off. Traders of the single currency will be keeping an eye on French and Italian industrial output at 7.45am and 9am respectively. The French report is anticipated to show an increase of 0.4%, and the Italian figure is tipped to be 0.2%.

The UK will report the latest manufacturing output numbers at 9.30am, and economists are anticipating a 0.3% rise. The pound pushed higher yesterday as talk of Theresa May’s possible cabinet reshuffle seemed to strengthen her position as Prime Minister.  

US indices finished slightly lower last night, but are still near all-time highs. Trading in New York subdued as the US celebrated Columbus Day. This week we can expect earnings from major banks like Citigroup, Bank of America and Wells Fargo. Trading revenues at banks has been in decline for the past few quarters, and investors will want to see how the finance houses are adjusting to historically weak dealing income.   

Oil was slightly firmer last night as traders are concerned about supply, OPEC will be holding a meeting next month, and a senior official from the group stated that ‘extraordinary’ measures were needed to re-balance the market. Saudi Arabia has expressed an interest in extending the production freeze, and Russia are open to the idea of extending the production cut also.

FX snapshot

EUR/USD – has been in decline for the past month, and if it continues it could target 1.1662 or 1.1613. Rallies may run into resistance at the 50-day moving average at 1.1846, and a break above the metric could see it target the 1.2000 region.

GBP/USD – 1.3133, the 50-day moving average is acting as support, and if the level is held it could target 1.3300. A break below 1.3133 could send the market to the 100-day moving average at 1.3020, and the next support below that could be the 1.2900 area.

EUR/GBP – is eyeing the 50-day moving average at 0.9021, and if the mark is cleared it may target 0.9226. Moves lower may find support at the 100-day moving average at 0.8915 or at 0.8800.

USD/JPY – has been driving higher since early September, and if the positive run continues it might encounter resistance at 114.49. The 200-day moving average at 111.88 could act as support. 


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