Daily Market Update

Unfortunate Events Over The Weekend Create Market Volatility

October 02, 2017

The U.S. Dollar remains relatively strong after last week’s momentum built on Fed confidence, decent economic indicators, and concerns over the political tensions in the Euro-zone.

USD

The U.S. Dollar remains relatively strong after last week’s momentum built on Fed confidence, decent economic indicators, and concerns over the political tensions in the Euro-zone. The region of Catalunya held an illegal referendum yesterday that resulted in violent clashes with the state police, which was adamant that the procedure not be undertaken.

Ugly scenes of voter suppression hit the airwaves across the world, suggesting that the separatist movement is much more serious a problem than thought. Thus far, European stocks and the shared currency remain unaffected, but this could change as the downside risks from this even have worsened.

Today’s economic docket consists primarily of Purchasing Managers Index, which already were mixed on the other side of the Atlantic. Markit and ISM figures for the U.S. will be released at 9:45AM and 10AM respectively. We shall also monitor market reaction to the tumultuous news cycle we are experiencing that includes details about the natural disaster effects on Puerto Rico and the awful mass shooting in Las Vegas overnight.

 

EUR

The Euro is still subdued following a weekend of unfortunate violence in Spain that saw police physically prevent a controversial independence vote from happening in the wealthy northeastern region of Spain where Barcelona is the capital. Potentially the biggest constitutional crisis since the country recovered from the dark days of the Franco dictatorship, the people of Catalunya voted towards becoming a sovereign entity with already a national flag, own language, and distinct history.

President Mariano Rajoy said this election does not count as it violates the law and does not give voice to the entire nation on a very important matter. Regardless, PMI’s and unemployment figures for the Euro-zone came out slightly better than expected, preventing damage to then Euro. 90% of Catalonians that voted are said to have chosen to separate from Spain.

 

GBP

The Pound fell slightly as a result of Markit PMI Manufacturing numbers that failed to impress. An expected expansion reading of 56.2 did not materialize as it only reached 55.9 while prior month stats were downgraded. Additionally, Brexit has pushed banks to start choosing new locations and employers are starting to give notices to British employees of upcoming changes. There is little positive for Sterling down the line with the exception of higher rates from the Bank of England. This is the weakest GBP since mid-September.

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