The Euro has started the week on the retreat against both the Pound and the Dollar. Political uncertainty remains the key factor behind the Euro’s dip in value of late. The Catalan independence vote is still weighing on investors decision to buy the Euro as a not-so-clear letter to the Spanish Government from Catalan President Puigdemont. According to reports Catalonia will still declare its independence from Spain, however the declaration of independence which is the formal process of breaking away from Spain has been suspended for now to allow for talks between the Spanish government and the Catalan region to begin. This may be trickier than first thought and could cause major volatility on Euro exchange rates as the vote has been declared as illegal by the Spanish government and could lead to further spouts of violence if a they block the Catalonian people’s wishes.

However, economically the Eurozone doesn’t look too bad. A general improvement in economic conditions of late has meant that the European Central Bank (ECB) is likely to announce a tapering of their Quantitative Easing (QE) programme at the October 26th meeting. The pressure was back on ECB policymakers to announce this on Monday as the Eurozone recorded better than expected trade balance figures due to increased consumer demand.

This week there isn’t much in the way of data that could affect the Euro besides inflation data and the ZEW economic survey from the driving force of the Eurozone, Germany. Inflation data will be keenly watched to see if the Eurozone will hint at tapering their QE program. Any increase in inflation will mean that more pressure will be put on the ECB to act, which would be Euro positive. Economics aside, Mario Draghi’s speech on Wednesday is likely to be a mover of Euro exchange rates, if there is any hint as to what is to be announced on the 26th.