Catalexit might dampen Euro after all
By Peter Rosenstreich
At first it seemed that Catalonia’s independence elections would not dent the Euro, but events have turned darker. We expect the Euro to fall short term: a break of its 5-month uptrend at 1.1836 USD indicates bearish extension to its August low of 1.1660.
Both sides of the independence/remain struggle have taken harder lines. Catalonia’s regional government has announced demonstrations for today, and some of its more-radical officials have called for a unilateral, immediate declaration independence. If the latter happens, Spain’s central government might possibly have legal power to take control of regional policy and fiscal management. Meanwhile, the European Commission has come down heavily on the side of remain, issuing a statement that Catalonia would immediately be thrown-out of the EU if it were to break with Spain. The tough posturing of both sides makes compromise all the harder, and invites extremists to take action.
Rupee and emerging-market currencies looking weak
By Peter Rosenstreich
Tomorrow, India’s central bank just might implement a surprise cut in interest rates, even though markets have been expecting no change. India’s economic expansions has slowed significantly, which could trigger the Reserve Bank of India to loosen money. The result: a softening of the Indian rupee and probably other emerging-market currencies. If the bank does not cut rates on Wednesday, it probably will signal intent to do so at its next monetary policy meeting on 6 December.
AUS strong despite interest rate flatline
By Yann Quelenn
Upside pressure on the Australian dollar continues, thanks to a strong economy and its exposure to gold and metals – which should rise, thanks to increasing global inflation.
The strength continues, despite yesterday’s decision by the Reserve Bank of Australia to hold prime rates unchanged at 1.5% – the 14th consecutive months without a change. The RBA said it is confident about growth picking up soon and that there is no hurry to tighten money. Australia currently has low wage growth; inflation is below 2%, just under its long-term target; and the economy grew in the second quarter at 0.8% over the first quarter.