Politics and its impact on Forex market| FXStreet

Spanish goverment to suspend Catalonia's autonomy

Spanish government moves forward with the intervention of Catalan autonomy

  • Senate will vote the application of Article 155 on Friday
  • Catalan government would be discontinued and Catalan Parliament put under supervision

Uncertainty over Catalan government reaction

  • Catalan leader, Carles Puigdemont, threatened to declare formal independence
  • Puigdemont will speak on the Senate committee on Wednesday
  • A Catalan parliamentary session is scheduled for this Thursday
  • Tension could escalate further if Catalan Parliament do not recognize the Senate decision

Catalan business plays it safe

  • Spanish Government cuts growth forecast for 2018 to 2.3% from 2.6%
  • Most of the biggest corporations move their legal addresses outside the region to guarantee the EU legal framework

Risks about Catalan independence are severely underpriced in the Euro

We believe that the conflict between the Catalan and Spanish governments is a serious threat to the Euro. The wave of violence enacted by the Spanish government has just aggravated a political conflict that has been there for years, even if ignored by markets. Moreover, it adds another nightmare for European officials to deal with. Even if Grexit and the sovereign debt crisis were dodged, the structural infrastructure of the Eurozone was not reformed.

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Catalonia at a glance

Catalonia is an autonomous community of Spain located on the eastern extremity of the Iberian Peninsula. It is designated as a nationality by its Statute of Autonomy. The capital and largest city is Barcelona, the second-most populated municipality in Spain and the core of the seventh most populous urban area in the European Union.

After the Spanish Civil War, the Francoist dictatorship enacted repressive measures, abolishing Catalan institutions and banning the official use of the Catalan language again. From the late 1950s through to the early 1970s, Catalonia saw rapid economic growth, drawing many workers from across Spain, making Barcelona one of Europe's largest industrial metropolitan areas and turning Catalonia into a major tourist destination. Since the Spanish transition to democracy (1975–1982), Catalonia has regained considerable local autonomy in political, educational, environmental, and cultural affairs and is now one of the most economically dynamic communities of Spain.

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Japan in Election mode

The Japanese economy has been on the recovery path on the back of Abenomics and Japanese Prime Minister Shinzo Abe has called a snap election to be held on 22 October to take advantage of the recovery in his approval ratings due to a rising threat from North Korea as well as to exploit the current weakness of the opposition.

The latest election poll shows that Abe’s ruling coalition heading for a big win after Tokyo Governor Yuriko declined to run for a lower house seat. Should the ruling coaling maintain its two-third’s super majority in the Parliament, the impact on market is unlikely to be significant. Should the unexpected happen, the USDJPY may fall as a knee jerk reaction to rising political uncertainty

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