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Catalonia in the Spotlight as Euro to Pound Rate Declines

The Euro has slipped against the Pound today, ahead of possible civil unrest in Barcelona. The Catalonia crisis remains in the headlines, as the Spanish government attempts to shut down the Catalonian leadership.

  • EUR GBP trades down at 0.8839 – GBP EUR rate rises to 1.1311
  • Euro declines on fears of Catalonian arrests – Will regional ministers face arrest?
  • Pound advances on BoE rate hike hopes – IFS warns of tough budget decisions
  • Will Euro rally on confidence stats? – UK confidence score could worsen tomorrow

The Pound has been a slightly stronger currency, having traded positively because of hopes for a UK interest rate hike this week.

Euro Dips ahead of Government Crackdown in Catalonia

As with the previous week, the Catalonian independence crisis has played a major role in weakening the Euro today.

Last week saw Catalonian President Carles Puigdemont ‘officially’ declare independence, but also saw the Spanish government activate Article 155.

The article has never been invoked before and enables the national government to take over from regional authorities.

The Spanish government’s shutdown is expected to begin today, but there is still uncertainty about how this will be effected.

Puigdemont has seemingly arrived in parliament despite being marked for removal, along with other high-ranking Catalan officials.

If these figures are arrested this could spark violence in the streets, given the high tensions and aggressive opposition to perceived Spanish authoritarianism.

Pound Ticks Up on BoE Rate Hike Hopes

On a crucial week for the UK economy, the Pound has made a minor rise against the Euro.

The main source of support has been the expectation that the Bank of England (BoE) could raise UK interest rates on Thursday.

Rates were last cut to 0.25% in August 2016 and have remained at that historic low ever since.

With UK GDP rising against forecasts, however, there have been hopes that the BoE could return rates to 0.50% on November 2nd.

Other UK news has been more concerning – the Institute for Fiscal Studies has warned that Chancellor Philip Hammond could face great difficulty in delivering the budget in late November.

The worry is that if the Chancellor commits to continued austerity, the economy could become even weaker, all for the benefit of reaching a more-balanced budget.

Euro Recovery possible on Imminent Eurozone Confidence Stats

The Euro might be able to advance against the Pound in the near-term, when Eurozone-wide confidence data is released.

Predictions have been for higher reported business sentiment and industrial sentiment, in addition to a rise in services sentiment.

If these forecasts are accurate then the Euro might have a chance to print higher against the Pound, but later German inflation stats could erase any gains.

While only a preliminary estimate, there have already been projections that annual German inflation will slow today.

The next UK data will also be confidence-related, when the GfK consumer confidence score is announced early on Tuesday.

Unlike the Eurozone stats, however, expectations are for a decline in UK consumer confidence from -9 points to -10.

Current Interbank EUR GBP Exchange Rates

At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.8839 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.1311.