The euro has posted losses in the Friday session. Currently, EUR/USD is trading at 1.1804, down 0.40% on the day. On the release front, German PPI gained o.3%, beating the estimate of 0.1%. In the eurozone, the current account surplus jumped to EUR 33.3 billion. Over in the US, Existing Home Sales is expected to slow to 5.30 million, and Federal Reserve Chair Janet Yellen will deliver remarks at an event in Washington.
The Catalonia crisis enters a new phase on Saturday. The Spanish government is expected to implement Article 155 of the Constitution, which allows for the suspension of Catalonia’s autonomy and direct rule from Madrid. This is in response to the refusal of the Catalan government to comply with a deadline to withdraw its declaration of independence. However, this clause has never been triggered before, and it’s not clear what exact measures the central government will take. With emotions near the breaking point, the Spanish government will not want to be seen as repressing Catalonia so as to avoid further unrest. The crisis has already taken an economic toll. Many large companies are moving their headquarters from Barcelona to Madrid, and tourism to Catalonia has slipped 15 percent since the crisis began two weeks ago. The Spanish stock market was lower on Thursday, and this dragged down the German DAX and French CAC indexes as well.
European Union leaders are in Brussels for a two-day meeting. On Thursday, British Prime Minister May addressed the group, pleading for progress in the deadlocked Brexit talks. May is facing pressure from some British lawmakers to simply walk away from Europe, and she reminded the 27 EU leaders that she needs to reach a deal that she can sell back home. The EU leaders will reconvene on Friday without May, and are expected to tell her that more progress must be made before the EU is willing to discuss a post-Brexit trade relationship with the UK. The Europeans want to see more progress on the amount of Britain’s exit bill, the border with Northern Ireland and the jurisdiction of the European Court of Justice on EU citizens living in London. There are significant gaps on all three of these issues, and compromises will have to be hammered out if the talks are to move forward.