Catalan Independence: Is it a Big Deal?
Over the weekend, Separatist parties won an absolute majority of seats in Catalonia’s regional parliamentary elections. Regional independence is an issue that has divided Spain for decades and this latest election has put further pressure on the central government in Madrid.
The party at the centre of things is secessionist group ‘Junts pel Si’ which in English means ‘Together for Yes’. Junts pel Si won 62 seats of the 135 available, while a smaller leftist party also pro Catalan independence ‘CUP’ also won another 10 seats. Jointly, this means that parties who are pro Catalan independence won 47.33% of the vote and as Acting Catalan regional government head, Artur Mas put it:
“Catalans have voted yes to independence!”
The timeline to unilaterally declare independence from Spain that both parties campaigned on is 18 months.
With only a small gap down after the weekend’s Catalan election results, the market isn’t getting carried away with headline whipsaws. Being only a local election with the possibility of an independence vote that Spain will likely reject in court, things are still quiet.
I do however expect this narrative to continue to gain some traction and a further cloud of uncertainty to once again cast a shadow over the Euro.
More Fed Speakers
We ended the week with soundbites in favour of liftoff from Fed speakers Bullard and George.
This of course followed up from Janet Yellen’s most recent hawkish speech which saw her receive medical treatment after becoming light headed. Without trivialising a serious health issue, I’m sure you can see the irony in this…
Bullard reiterated the case made in earlier speeches and interviews for the normalisation of monetary policy:
“I’d like to get going. For the committee it is always hard to have made a big decision at one meeting and then come back at the next meeting. What kind of data did you get in the intervening period that changed your mind?”
He went on to say that it was not clear if other policymakers will have enough new data in hand by October to support a rate hike, suggesting December.
Known hawk George’s comments also had a hawkish tone, alluding to the fact that she believes the Fed should raise rates soon in order to be able to keep subsequent rate hikes gradual.
“You cannot afford to get into a state of paralysis around looking for data that might continue to reassure you. So when conditions warrant, as I believe they do today, I think interest rates need to adjust.”
Just keep in mind that Bullard does not have a vote in 2015 but will be a voting Committee member in 2016, while George has not been a voting FOMC Committee member since 2013 but will regain the right as the Kansas City district head once again in 2016.
The fact that the Fed was so dovish coming out of their September meeting last week but now all of a sudden everyone spruiking a hawkish tone is what frustrates traders the most. So much for smooth guidance.
On the Calendar Monday:
NZD Daylight Saving Time Shift
USD FOMC Member Dudley Speaks
While Dudley’s Hilsenrath interview for the WSJ is the most market sensitive, we also get a few more Fed speakers tonight with Tarullo, Evans and Williams all on the card. Add MPC Member Cunliffe (GBP) and we have a full house!
Chart of the Day:
Today’s chart of the day is a follow on from last week’s NZD/USD 4 hour channel setup.
Friday’s daily candle once again touched the Kiwi channel (yes, again to the pip) we have been following, giving the level its 4th touch. But with Monday’s gap down, price has still rejected the level… for now.
With each touch and subsequent failure to make a lower low, the sellers are absorbed. The breakout is near.
Do you see opportunity in the Kiwi chart?
Dane Williams – @VantageFX
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