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Dollar Benefits from Spanish Crisis

By Patrick Higgins  |  06/10/2017 16:15
Spanish bond prices and stocks listed on the IBEX 35 had resurged slightly yesterday. This was due to the Spanish Constitutional Court suspending the Catalonian Parliament meeting on Monday.
 
Despite this ruling, the Catalonian government is moving to defy the suspension. Catalonia Head of Foreign Affairs, Raul Romeva, released a statement today. It notioned that Catalonia's parliament would proceed with its Monday session, with or without court approval. The announcement sent Spanish stocks, bond prices and even the Euro into a downward spiral.
 
The country accounts for a fifth of Spain’s GDP. It is feared that Catalonia might move to declare unilateral independence. This has resulted in two of Spain’s largest banks: Sabadell (5th) and Caixa (3rd) announcing that they are to moving their legal bases from Barcelona to Alicante, in order to continue their operations under the European Banking Authority. The EU has said it will not admit an independent Catalonia.
 
The Euro has dropped $0.04 since the beginning of September. Leaving it oscillating around $1.16 over the last few days. Meanwhile, the dollar has benefitted from the turmoil in Europe. This week is the DXYs fourth consecutive week of positive growth this year.
 
However, the dollar may end up losing some of the gains it has made at the Euros expense this week. At 12:30 GMT today, the US jobs data from September will be released by the Dept of Labour. Analysts expect the data to be substantially lower than that of August. This is due to the disaster caused from hurricanes; Harvey, Irma and Maria. The damages caused by the hurricanes is estimated to have cost the US job market 125,000 potential jobs.
 

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