Europe faces Spain’s constitutional crisis over Catalonia

THE European region faces uncertainties as the Spain-Catalonia crisis grows. US recorded low of jobless claims with growing existing homes sales. China’s growth stayed on track, recording steady inflation gains. UK’s inflation remained on track despite the ongoing Brexit negotiations.

US industrial production rose 0.3 per cent in September, the highest in three months. Building permit grew 1.22 million while housing starts gained 1.13 million in September, both missing forecast.

US jobless claims was at 222,000 for the week ended October 14, the lowest recorded and probably indicating an impending rate hike on job market recovery. Existing homes sales rose 5.39 million in September which was higher than the previous month.

China’s consumer prices rose 1.6 per cent in September from a year ago, matching forecast. Producer prices expanded 6.9 per cent on an annual basis, the highest seen in six months.

China’s GDP grew 6.8 per cent in the third quarter (3Q) amid the 19th National Congress and revived investors’ confidence. Industrial production, including utilities and mines, rose 6.6 per cent in September, matching forecast.

German ZEW sentiment based on institutional confidence, gained 17.6 in October from good growth. In the eurozone, consumer prices grew 1.5 in September from a year ago. Trade surplus rose 21.6 billion euros in August compared with the previous gain of 17.9 billion euros.

Spain faces domestic turmoil as Catalonia still fights for independence. The central government is prepared to execute Article 155 of the Constitution to remove the autonomous power from the Catalan Government.

UK consumer prices expanded three per cent in September on an annual basis, the best recorded in more than five years. Retail prices index rose 3.9 per cent on a yearly in September.

British average earning on quarterly seasons ended August rose 2.2 per cent in strong pace. Claimant counts for jobless benefits rose 1,700, matching forecast. Unemployment rate stayed at 4.3 per cent. Retail sales declined 0.8 per cent in September on a monthly basis. Technical forecast US dollar/Japanese yen traded higher last week as the yen devalued with the election coming closer on October 22. The market closed at a three-month high on Friday and it could climb higher this week. The bulls may ascend to 114.50 to 114.80 tops if the demand stayed strong. A drawdown could meet the support at 112 to 112.20 region.

Euro/US dollar has been trading sideways as the dollar strengthens. The trend could linger between 1.17 to 1.1850 until the European Central Bank president Mario Draghi comments on his tapering programme on Thursday. The dollar could also acta as a catalyst to influence the direction of this market.

British pound/US dollar traded slightly lower last week from strong economic data. This week, we reckoned the trend could be supported at 1.3050 and it could also be proned recovery with a target aimed at 1.33. In times of uncertainty, breaking beneath 1.3050 might test 1.2950 region.

Disclaimer: This article is written for general information only. No liability by the writer, publisher or any third party involved in the distribution of this work. Dar Wong is a registered fund manager in Singapore with 28 years of global trading experiences. You may reach him at dar@pwforex.com.