EUR: big trouble in little Catalonia as Spain looks to impose direct rule

Yesterday, the Catalan leader, Carles Puigdemont stated that he hadn’t declared independence, but would if Spain carried out its threat to suspend the region’s autonomy. In response, the Spanish government said it planned to push ahead with the move to seek direct rule over Catalonia. This is an unprecedented situation and if the Spanish government does impose direct rule we can expect the crisis to elevate. What bearing this has on the euro’s performance is not yet clear, but it will surely not bode well?

One thing is clear: the potential impact of the situation has not yet filtered through to the markets, as the euro strengthened against sterling and the US dollar. As it stands, it is only the Spanish markets that are being affected, but this could easily spread beyond the Spanish borders and into the wider eurozone. Let’s hope there is a resolution to the situation sooner rather than later.

There are no major data releases today, but fallout from the UK retail sales and the situation between Catalonia and Spain could have a bearing on any euro movements.