- Euro US Dollar Slides to 1.1739 – US Dollar Euro Climbs to 0.8515
- Catalonia Tensions Escalate – EUR Comes Under Pressure
- Trump Tax Picks up Momentum – USD Remains on Strong Form
The Euro US Dollar exchange rate tumbled this morning on news that Spain initiated article 155 over the weekend (allowing them to take direct control over the autonomous region of Catalonia), and that two regions in Italy also voted overwhelmingly for autonomy.
Political Instability in the Eurozone Rises – Euro US Dollar Exchange Rates Tumble
Euro (EUR) exchange rates have been left fluctuating today as tensions throughout the currency bloc have escalated, kicking off with Madrid officially initiating article 155 to take direct control over the autonomous region of Catalonia, Andrej Babis and Sebastian Kurz (both Eurosceptics) winning the Czech Republic’s general election and the Austrian national election respectively, and finally two of Italy’s wealthiest regions voting overwhelming in favour of greater autonomy from Rome and the EU.
The cracks are seemingly widening, as it were, with investors becoming increasingly worried that nations within the bloc are moving towards the same decision as the United Kingdom and will push to separate from the EU.
In regards to Catalonia, Spanish Foreign Minister Alfonso Dastis called for citizens to obey Madrid, stating:
‘We are going to establish the authorities who are going to rule the day-to-day affairs of Catalonia according to the Catalan laws and norms … I hope everyone will disregard whatever instructions they will be planning to give because they will not have the legal authority to do that’.
Catalonia leader Carles Puigdemont has since declared that his government does not accept direct rule, confronting Spanish Prime Minster Mariano Rajoy’s plans to remove the government and push for another election.
The result is another impasse whilst Madrid pushes for a leadership election to decide who will be Puigdemont’s replacement.
In the meantime, markets have instead shifted to more reliable currencies like the US Dollar, which is currently maintaining a strong form in the wake of progress with US President Donald Trump’s tax reform proposal.
US Dollar (USD) Exchange Rates Climb as Trump Tax Gains Momentum
Last week saw a major victory for the Republican’s tax reform proposal, with the Senate officially approving a $4 trillion budget resolution – the blueprint for federal Dollar spending over the next decade.
This has been regarded as a massive leap forward, putting the Republicans on track to potentially pass tax reform before the end of the year.
It should be noted, however, that some obstacles do remain; the tax plan is still in the process of being drafted and, despite control of both the White House and chambers of Congress, the Republicans have repeatedly failed to push through similar major legislative reform – like the repeal and replacement of ‘Obamacare’.
Market interest in the ‘Greenback’ has also been bolstered by ever rising US Treasury yields, with 2-year yields hitting their highest value since 2008.
EUR USD Exchange Rate Forecast: ECB Rate Decision Ahead
The outlook for EUR USD is predominantly negative, with markets uncertain about the European Central Bank (ECB)’s monetary policy plans ahead of Thursday’s rate decision and the situation in Catalonia continuing to escalate.
Nonetheless, there are a range of significant data releases on the calendar for both nations this week, with Tuesday featuring a range of Markit PMI releases for the Eurozone and the US.
Wednesday will feature German IFO survey releases, US durable goods orders and the US housing price index.
Thursday will feature the ECB rate meeting and accompanying statement, and finally Friday will see the release of US employment figures and the US advance goods trade balance.
The sheer abundance of data could leave the EUR USD exchange rate volatile.