All Eyes On Spain As Risks In Catalonia Build

All Eyes On Spain As Risks In Catalonia Build

Swissquote Ltd  | Sep 29, 2017 16:22

While the German elections (still a non-issue) continues to dominate Europe conversation, events in Spain are about to heat up. Where this story takes markets, confounds and worries this strategy desk.

The Catalonia referendum on Independence is planned to take place on Sunday 1st October. The Sunday vote will ask Catalans if they would support a separate state from Spain. Based on the 1978 “unity” agreement, the Spanish constitutional court has ruled the referendum illegal. The regional government remains committed holding a vote while Spain's central government has increased efforts to eliminate any trace of a referendum including confiscating ballet boxes by force; shutting down social media sites and detaining regional political figures.

Markets are betting that the efforts by the central government to stymie representative results will delegitimize any Sunday ballot. Yet these efforts by the central government, in our view, will most likely backfire as the Catalonians that do find a way to vote (eliminating balancing vote of opponents of independence) in a board majority vote for secession. A similar pattern witnessed in the “non-binding” referendum in 2014. To defuse tensions, there have been signals from both sides that discussions for a calmer resolution are on the table.

Offers to the Catalan government of a new financial constitution will address a primary point of contention. But overall we have the feeling that passions are running high, where suggestions of future talks will not appease the Catalonians. Markets are not pricing in any risk for Sunday as short-term EURUSD implied volatility are actually lower then longer term. We would be wary of hold spec positions over the weekend as truly all things are possible in Barcelona.

Swissquote Ltd

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes


Download the App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors. is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.