- Catalonian President is open to meet Spanish Prime Minister
- Important event for this week would be the Brexit negotiation
- Sterling has seen a lacklustre performance
- The precious metal is battling with the psychological level of $1300
Investors are keeping a close eye towards the final verdict by the Catalonian President, Charles Puigdemont, on his illegal referendum. Madrid gave a Catalonian strict timeline to clarify their position and the president was asked a very simple question which had only two answers in terms of independence; Yes or No. In his letter to Spanish Prime Minister Rajoy today, he declared that he is open to meet Spanish Prime Minister in order to discuss the situation. This hasn’t helped the situation given what the mandate was given to him by Madrid. Mr. Rajoy asked for clarity and clearly stated any ambiguous answer would be equal to declaring independence. The letter pretty much gives the message that he is defending the independence situation and he is still not open to provide a clear answer.
The president first declared independence (on the back of the illegal referendum) but then deferred its implementation only a few seconds after. The Catalonian President, Charles Puigdemont, has an arduous decision to make. On one hand, he needs to respect the decision and efforts made by thousands who came out to vote for this referendum. By declaring independence he is likely going to be arrested and Madrid would have to impose the article 155 of the Spanish constitution.
Under this article, Madrid would directly rule and it would also trigger mammoth unrest in the country. On the other hand, if he backs down, the Catalan government isn’t going to accept his leadership anymore and the government would spilt. This entire situation opens the Euro currency to a significant risk and uncertainty. Unless we could see a clear path out of this Catalonian situation, we expect the upside to remain capped.
Another important event for this week would be the Brexit negotiation which is in a deadlock position as the EU chief negotiator, Michael Barnier, confirmed. The British currency, Sterling, has seen a lacklustre performance due to this. However, Central bank’s governor’s testimony this week would be far more important. The governor would have to look at the economic data and Brexit negotiations carefully before he reveals his position.
The precious metal is battling with the psychological level of $1300. There are a number of factors supporting the price. For instance, the US inflation data released last week was pretty much weak and this keeps the Fed in check and they cannot adopt an overly aggressive stance towards the interest rate hike path. Secondly, the geopolitical tensions are keeping investors on their toes as South Korea focuses on its drills. Finally, Iraq’s Kurdish region and Iran’s nuclear deal could easily move in any direction.
