investors concerns about the outcome of the referendum on Catalan independence
Date: October 3, 2017
– The political crisis in Europe and hopes for good US economic reports have strengthened the dollar’s value on the market. Catalan independence referendum from Spain made the investors worry. The result of the referendum shows the win for almost 90% of the independence. Today, the Spanish government will hold a meeting in response to the crisis, but with regard to recent events, it is not expected that the parties can reach an agreement. Catalonia is one of the most important economic regions in Spain, and have 20 percent of GDP and 25 percent of Spain’s exports
– Spain saw a strong economic recovery after the 2008 financial crisis, but the recent political crisis can complicate the situation and put the Central Bank in a difficult position. Independence of Catalonia may also encourage other sensitive regions of Europe to hold an Independence Referendum. In Italy, pro-independence movements have also recently been activated and supported by the people.
– The main issue for investors is that the long-term impact of these events on the euro is unclear. However, the euro has been built on the basis of such political crises, to bear this political crisis but till the time the economic unity kept. Undoubtedly, the Catalan government will seek to remain in the European Union, but it is unclear whether Spain will oppose it or not. If Catalonia, after independence from Spain, remained part of the euro area, the economic impact of this political crisis would be minimal. But if Spain opposes the membership of Catalonia to the euro area, the political crisis in the region will be intensified.
– It now seems the investors are worried about the future and the euro continues to go downwards so that it has reached the bottom of the year at 1.1715. If the crisis intensified, euro-selling pressures will also increase, and this could push the currency pair to key support at $ 1.1650