The Euro has traded in a narrow range against the US Dollar today, ahead of a possible crash when a key Spanish deadline passes.
Article 155 Activation could Trigger Catalan Riots, Euro Crash
Looking a short distance ahead, the Euro may dive against the US Dollar on Thursday, depending on news out of Spain.
After a deadline for Catalonian President Carles Puigdemont passed on Monday, a new deadline was set for Thursday.
Puigdemont has to clarify if he is officially declaring independence for the region before then, or else he faces the removal of powers from the region.
This would be accomplished by the Spanish government activating Article 155, a constitutional measure that strips Spain’s regions of their authority.
Speaking on Wednesday morning, Spanish Prime Minister Mariano Rajoy declared;
‘Tomorrow (Thursday) ends the time required for Puigdemont. He has the opportunity to make clear whether or not he declared independence’.
Firing a warning shot at the Catalonian government, Spanish Deputy PM Soraya Saenz de Santamaria added;
‘[If Puigdemont does not declare his intention], it will mean Article 155 is applied. We will always apply the Spanish Constitution and applying Article 155 is applying the Constitution’.
In the event that the Spanish government takes the nuclear option and activates Article 155, the Euro could drop sharply against the US Dollar.
While this action would seemingly nullify the problem of Catalonian independence efforts, it could just stir up further anti-Spanish sentiment in the region and lead to riots.
At this time, it is unclear just how the situation can be resolved amenably on both sides, but cracking down on the Catalonian government might just intensify efforts for independence.
US Dollar Turbulence Possible if Trump Tax Plans Fall Through
Future US Dollar movement could be triggered by ongoing US political developments, as Republican officials work to pass a package of tax reforms.
President Donald Trump has been vocal in backing this policy, calling the proposed cuts ‘the largest in US history’.
There is a problem, however – Trump’s plans have not garnered universal support from Democrats or even Republicans, to the level that they may be blocked from progressing.
After the high-profile failure of efforts to repeal and replace the Affordable Care Act (ACA), the pressure is on for the Trump administration to fulfil one of its promises.
In the Senate, Republican Majority Leader Mitch McConnell has been optimistic that tax reforms will eventually be passed;
‘The goal is to get it done this calendar year. But it is important to remember that Obama signed [the ACA] in March of year two. Obama signed Dodd-Frank in July of year two. We’re going to get this job done’.
A prominent US Senator, Republican Lindsay Graham, has given some stark warnings about his party if the reforms aren’t passed. Speaking on CBS, Mr Graham said;
‘If we don’t, we’re dead. If we don’t cut taxes and we don’t eventually repeal and replace [the ACA], then we’re going to lose across the board in the House in 2018. And all of my colleagues running in primaries in 2018 will probably get beat.
[If we don’t pass this reform, it will be] the end of Mitch McConnell as we know it.
Our problem is that we promised to repeal and replace [the ACA], and we failed. We promised to cut taxes and we have yet to do it. If we’re successful, Mitch McConnell’s fine. If we’re not, we’re all in trouble’.
In the event that the Senate blocks the attempts at tax reform, the US Dollar could drop sharply.
This would be because of fresh uncertainty about Donald Trump’s leadership, with two high-profile policies shot down before the first year of his term is even over.
Recent Interbank EUR USD Exchange Rates
At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1772 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8491.
Comments are closed.