Search ForexCrunch

The Spanish government will convene on Saturday to begin suspending the Catalan autonomy and Spain will enter unchartered territories.

The move by Puigdemont did not move the euro too much, but the quick response from Spain already sends EUR/USD some 40 pips to the downside.

Spain is the fourth-largest economy in the euro-zone and led its recent recovery. The current crisis is already taking a toll on tourism. The longer it lasts, the deeper the economic damage.

Earlier, Catalonia’s President Carles Puigdemont responded to Spain’s ultimatum to clarify its position about independence by threatening to fully declare it if Spain suspends the autonomy. While it could have also been perceived as a clarification that independence was not declared, the threat did not go down well in Madrid.

Efforts to mediate have fallen on deaf ears so far and relations have just reached a new low. Cooler minds are not prevailing in this fight. Catalonia held a disputed referendum on October 1st which saw a crackdown by Spain. Around 90% voted for independence but turnout was low and it wasn’t recognized by anybody.

EUR/USD is trading at 1.1775, down from a high of 1.1822 earlier in the day. Support awaits at 1.1720. Here is how it looks on the euro/dollar chart: