The Day So Far…

In the wake of a quiet economic calendar the focus remains firmly on Spain following the announcement from the Catalan leader last night who stepped back from making a full declaration of the region’s independence. The FT wrote an excellent article this morning summarising some of the key steps with the main point being that the response from Madrid is now the next crucial decision as to how the situation evolves from here. The most aggressive way in which the government can cease control of the autonomous region is by evoking Article 155 but this would be seen as a more extreme move that may well incite the same reaction as the violent scenes that were seen at the beginning of the month.

At this point I foresee a round of negotiation to take place before such action is taken by PM Rajoy in an attempt to preserve face on the international scene, and with the exiting 1978 Spanish Constitution stating the country is “indivisible”, the power definitely resides with the mainland. In light of the latest developments Spanish assets have outperformed in what would be classified as a moderate relief rally but we continue to remain vigilant in monitoring the situation moving forward.

The Day Ahead…

Looking ahead the main event will be the release of the FOMC minutes where by market participants will be focused on the key issue of inflation and the balance of whether we are experiencing a temporary dip or is it something Committee members need to be more concerned about. At this point a December rate hike from the Fed is now priced at 91.7% according to FFR futures a quiet astonishing increase when you remember that probability was a low as 20% at the beginning of September. For energy traders owning to the Columbus day holiday on Monday the API crude oil inventories will be released later this evening with the DoE report to follow on Thursday afternoon.

 

Anthony Cheung
Anthony is a leading market commentator with over a decade of experience accumulated as Head of Market Analysis at a leading news and analysis organisation, and now a Director of Amplify Trading.