On Wednesday afternoon, the Pound has fallen by -0.3% against the Euro.
This decline comes despite the Catalonian situation remaining unresolved – the latest news has seen Catalan President Carles Puigdemont call for independence efforts to be suspended.
This effectively leaves the issue in limbo, causing Spain’s Prime Minister Marion Rajoy to demand clarity over whether the region is or is not declaring independence.
(First published October 10th, 2017)
This will cover the ongoing troubles in the Spanish region of Catalonia, where there has been a strong push to secure independence.
Pound Outlook: Is GBP-Boosting Interest Rate Hike Incoming?
The Pound could rally against the Euro in the coming months, depending on if the Bank of England (BoE) raises UK interest rates.
The BoE has recently come under pressure to hike interest rates, following reports from the Office of National Statistics (ONS).
Crucially, the ONS has recently corrected its previous workings, meaning that unit labour costs have been revised up from 1.6% to 2.4% in the three months to the end of June.
This has been good news for economists, as it means that there could be higher wages incoming for UK workers.
Previously, the BoE has refused to raise interest rates because low UK wage growth means that mortgage payers and those in debt would struggle from higher repayment rates.
If wages are finally climbing, however, then there is less holding the BoE back from agreeing to a rate hike.
If the BoE does raise UK interest rates in November, the Pound could rise sharply against the Euro.
Future Euro Forecast: Will Catalonian Chaos Erupt in Parliament Meeting?
In the near-term, the Euro may be influenced by the outcome of this evening’s meeting of the Catalonian government.
For context, this is because on October 1st Catalonian voters took to the polls in a controversial independence referendum.
Crucially, in the days after the vote the Catalan government claimed that around 90% of voters supported independence from Spain.
Since then, there have been high tensions in Catalonia before a key meeting of the Catalan parliament. Today’s meeting was originally scheduled to take place on October 9th, but Spanish courts blocked this.
There are concerns that today could see Catalan President Carles Puigdemont declare Catalonia to be an independent entity, which might trigger a sharp Euro crash.
If Puigdemont does make such a declaration, the Spanish government might implement Article 155, a framework that allows the government to take control of individual regions.
This would represent a new low in relations between Catalonia and wider Spain, potentially triggering region-wide protests and reactive violence.
Recent Interbank GBP EUR Exchange Rates
At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.1189 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.8936.