Spanish election could weaken the Euro
Local elections in Spain begin on Thursday and they are a cause for concern for Brussels. The election is predicted to be close between anti and pro independence parties. I would be surprised if any of the seven parties involved secure a majority victory. Political uncertainty is a key factor in currency weakness so this could create a small window of opportunity for euro buyers.
Catalans have a tough decision to make. They must decide whether to stick with a unstable separatist coalition whose leaders have been placed in prison or left the country, or take a risk on alternative parties that fall in line with a united Spain which would no doubt suit Spanish Prime Minister, Mariano Rajoy’s wishes.
Recent polls suggest a lead for Catalonian secessionists who have used a the slim victory in the last regional parliament to declare independence and cause a clash over sovereignty which has caused worry far beyond Spain. There was less than half of the electorate participating in this vote.
Catalonia makes up a significant portion of Spanish GDP, but it is the threat that other regions follow suit if independence becomes a reality. If other regions, not just in Spain decide to campaign for independence this could create a serious threat to the Euro.
If you are buying Euros with Sterling however be wary of hanging on for significant gains. Those with a requirement for buying Euros should pay attention to any new developments with both Brexit negotiations and the Catalan vote as any updates have the potential to move GBP/EUR significantly and the uncertainty surrounding Brexit negotiations is seemingly anchoring GBP/EUR below 1.15, it is something of a resistance point at present. Trade negotiations will no doubt be problematic, especially considering the length of time it took phase one negotiations. Trade deals will be hard fought.