“There’s no doubt that Catalonia, the issue has been weighing on the euro,” Quincy Krosby, chief market strategist at Prudential Financial, told Reuters.
The weakness in the euro currency on Friday also follows EUR’s worst day against the dollar in 16 months on Thursday after the European Central Bank said it would cut its bond purchases in half to 30 billion euros per month starting January.
“That [the ECB meeting]was the seminal meeting for the euro for this week,” Krosby added. “And then if you couple that with stronger U.S. data, that helps keep the euro weaker.”
While Catalans decision triggered a short-term risk-off event, the long-term outlook may remain intake.
“The central government in Madrid will now attempt to take direct administrative control of Catalonia following the region’s declaration of independence,” Stephen Brown of Capital Economics, told the Financial Times. “We still think that the economic effects of this political crisis will be fairly manageable. But the risks are clearly rising.”
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