Euro has worst week this year as Catalan crisis escalates

THE euro was on track last night for its worst week in 2017, undermined by the Catalan parliament’s independence vote and the European Central Bank (ECB) decision to prolong its bond purchases to keep interest rates low, while robust corporate earnings helped world equity markets advance.

The Catalan parliament’s declaration of independence from Spain, made after a secret ballot, is now likely to be ruled illegal by Spain’s constitutional court.

“There’s no doubt that Catalonia, the issue has been weighing on the euro,” said Quincy Krosby, chief market strategist at Prudential Financial in New Jersey.

Stronger-than-expected US third-quarter growth data helped bolster the dollar.

The US economy grew at a 3pc annual rate from July to September, showing resilience even as recent storms hurt consumer spending.

The euro had its worst day against the US dollar in 16 months on Thursday after the European Central Bank said it would cut its bond purchases in half to €30bn a month from January, maintaining an easy money policy well into next year.

Gold prices edged higher yesterday, after the Catalonian parliament’s independence declaration from Spain led investors to seek safety from political upheaval.

Declaration

Spain’s main IBEX share index was the worst-performing major index on the day, losing 1.5pc after the Catalan declaration.

The gap between Spanish and German 10-year government bond yields also widened 0.80pc to 1.20pc.

Europe’s STOXX 600 also cut gains after the vote, but closed up 0.6pc and overall European shares reached a five-month high overall on Friday, helped by strong earnings. The pan-European FTSEurofirst 300 index rose 0.54pc.

The Iseq index was up 0.75pc at 6,901.33.