Euro Gains But Broader Markets Yawn As Catalan Crisis Fizzles

Talking Points:

Euro gains as Catalan leader backtracks on independence declaration

Markets seemingly unimpressed as Spanish political uncertainty fades

US Dollar may bounce on hawkish September FOMC meeting minutes

Most major currencies marked time in Asia Pacific trade, with a handful of second-tier releases out of Australian and Japan passing by seemingly unnoticed. The Euro was standout, continuing to build higher after Catalan President Carles Puigdemont opted against unilaterally declaring independence from Spain following a controversial referendum seemingly produced a vote in favor of secession.

Tellingly, gains in the single currency were mirrored in a narrowing spread between German and Spanish 10-year bond yields, signaling ebbing risk premium to owning the latter country’s assets. That has conspicuously failed to inspire a broader risk-on mood however, with European stock markets outside Madrid and S&P 500 index futures treading water. Perhaps the risk was never taken entirely seriously.

The European data docket is empty, putting the spotlight on minutes from September’s FOMC meeting. Comments from most US central bank officials since the sit-down have leaned firmly on the hawkish side of the spectrum, hinting that more of the same might be on offer. While hardly novel, that might be enough to end what has looked like a corrective US Dollar pullback in recent days.

Asia Session

Euro Gains But Broader Markets Yawn as Catalan Crisis Fizzles