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EUR USD Exchange Rate Rises despite Spanish PM’s Warning

The Euro has risen by 0.3% against the US Dollar on Wednesday afternoon, although tensions remain high in Catalonia.

The latest update has come from Prime Minister Mariano Rajoy himself – the PM was speaking in the Spanish Parliament in Madrid.

Rajoy has insisted that the Catalonian government needs to confirm whether it is declaring independence or not, stating;

‘It is not possible to establish dialogue to grant something that’s not allowed under Article 2 of our constitution. We cannot recognise a law which does not exist’.

For context, Article 2 states that;

‘The Constitution is based on the indissoluble unity of the Spanish nation, the common and indivisible country of all Spaniards’.

There is still a background risk that Rajoy will trigger Article 155 to override the Catalonian government’s control of the region – if this occurs then the Euro could tumble in value.

(First published October 11th, 2017)

A temporary de-escalation of the Catalonian independence drive has enabled a small Euro to US Dollar rise today.

  • EUR USD exchange rate rises to 1.1827 – USD EUR trades down at 0.8452
  • Euro appreciates on diffused Spanish tensions – Concerns remain for Catalan issues
  • US Dollar drops on nuclear concerns – Will Korean crisis escalate further?
  • Euro volatility ahead on Rajoy speech – Traders look to US Fed speeches

On Tuesday, the Euro advanced against the US Dollar, opening trading at a rate of 1.1748 and closing higher in the region of 1.1814.

Euro Bolstered by Spanish De-escalation

In a moment of relief, the Euro has appreciated today thanks to events in Catalonia on Tuesday evening.

In a highly-anticipated meeting of the regional parliament, Catalonian President Carles Puigdemont said that while he had a mandate to deliver independence, parliament should immediately ‘suspend the effects of the independence declaration’.

For those fearing an official declaration of independence from Spain, this statement has come as no small relief.

For citizens still clamouring to be rid of Spain’s influence, however, this risks the anger of the crowd turning on Puigdemont himself.

US Dollar Slides as Trump Plans Exit to Iran Nuclear Deal

Today’s US Dollar losses have come from concerning signs that US could leave the Iran nuclear deal.

Signed in 2015, this legislation lifted trade and economic restrictions against Iran, in exchange for Iran no longer developing a nuclear arsenal.

Donald Trump has called the deal the ‘worst…ever negotiated’, so there is a definite chance that he could remove the US from the deal and risk a return to malicious nuclear activity in Iran.

As well as the fate of the Iran deal dominating headlines, the US Dollar has also been weakened by concerning developments in Korea.

While the North Korean nuclear escalation has been out of the spotlight recently, recent US military action has pushed the situation back to the fore.

In late September, North Korean Foreign Minister Ri Yong Ho declared that his country could take ‘countermeasures’ against the US in the region, including ‘the right to shoot down US bombers even when they are not inside the airspace border of our country’.

Since then, the US has indeed flown two bombers over the Korean peninsula, as part of exercises with the South Korean air force.

There has been no immediate reaction from North Korea, but these latest manoeuvres may be seen as a provocation, potentially risking NK military action.

Upcoming Speeches Threaten to Unbalance EUR USD Exchange Rate

There will be significant speeches coming out of the Eurozone and the US in the near-term, which could mean that the Euro drops sharply.

This is because the EU speech from Spanish Prime Minister Mariano Rajoy could see a dismissal of holding talks with Catalan officials.

In the worst-case scenario, Rajoy could invoke article 155, a constitutional measure that removes power from the regional government.

Both outcomes might trigger a Euro crash, as they would once again raise the prospect of Catalonia declaring itself independent of Spain.

Upcoming US news will also consist of speeches, coming from Federal Reserve policymakers. If officials Robert Kaplan and Charles Evans both back higher interest rates in December, then a US Dollar rally may take place.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1827 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8452.