12/10/2017 - Spanish PM Looks to Block Catalan Independence  - 12/10/2017

EUR

Spanish Prime Minister Mariano Rajoy took the first step on Wednesday towards suspending Catalonia’s political autonomy and ruling the region directly in order to thwart a push for independence. He demanded that the regional government clarify whether it now considered itself independent following a speech by Catalan president Carles Puigdemont on Tuesday night.

This requirement is a necessary step before triggering Article 155 of the constitution, which would allow Madrid to suspend the region’s political autonomy. Rajoy’s move could deepen the confrontation between Madrid and Catalonia but it also signals a way out of Spain’s biggest political crisis since a failed military coup in 1981.

The prime minister would be likely to call a snap regional election after activating the constitutional mechanism allowing him to do so. Puigdemont made a symbolic declaration of independence from Spain on Tuesday night but then immediately suspended it and called for talks with the Madrid government.

GBP

The U.K. will start spending more on plans for a no-deal Brexit if talks aren’t showing progress early next year, a scenario that looked increasingly likely as the European Union hardened its negotiating stance.

Chancellor of the Exchequer Philip Hammond said  yesterday that he’s reluctant to use taxpayers’ funds for plans that may turn out to be redundant, conceded that some contingency planning will be required as soon as the new year. As talks make slow progress in Brussels, the European Union toughened its position, saying it was unlikely to expand talks this month to include Britain’s request for a transition period after the split.

USD

The FOMC’s September meeting minutes stated that many policymakers felt another rate increase was likely warranted in 2017 despite the debate of low inflation. They also noted that further rate increases should depend on incoming data and that a few policymakers thought any further rate increases should be deferred until information ‘confirmed’ low inflation. 

While the Fed revealed plans to reduce its vast holdings of Treasuries and mortgage-backed securities, the minutes may provide clues on whether a U.S. interest rate hike is planned for December, analysts said. Investors were also concerned U.S. President Donald Trump could hurt his tax reform plan by feuding with Senator Bob Corker, a fellow Republican whose vote Trump will probably need.

Key Announcements

13.30 – USD – PPI MoM; Forecast at 0.4% against previous of 0.2%

13.30 – USD – Unemployment Claims; forecast at 255k against previous of 260k

15.30 – EUR – ECB Mario Draghi Speaks

16.00 – USD – Crude Oil Inventories