US Dollar Climbs Against Euro as Catalonian Crisis Escalates

The US dollar rose against the euro on Friday as domestic political troubles in Spain showed no sign of an end, which continued to weigh on the shared currency. However, the greenback lost some of its upward momentum today following the release of disappointing payroll data.

The Catalonian fight for independence from Spain escalated as separatists in the region appeared to be moving toward direct confrontation. Protests broke out across Catalonia following an independence referendum on Sunday. A general strike was also announced, which crippled economic activity in the prosperous region.

The protests were met with violence from security forces that Spanish Prime Minister Mariano Rajoy sent to Catalonia, which added insult to injury and increased the demand for separation. Concerns of a rapid move toward a messy independence fed worries about the stability of the eurozone, which will certainly be negatively affected. The euro lost ground against the majority of its main counterparts in light of these developments.

On the economic front, the US Bureau of Labor Statistics released a fresh report on employment in September. The report stated that the total nonfarm payroll employment had a minor drop of 33,000 jobs last month after gaining 169,000 in the previous month.

The data came short of expectations that pointed to a 90,000 job gain, as employment in the food services sector had a sharp drop of 105,000 employees. The drop was partly offset by a 23,000 job gain in the health care sector and 22,000 more jobs in transportation and warehousing. Employment in the financial, manufacturing, and business services sectors remained almost unchanged.

The report added that the unemployment rate dropped to 4.2% in September from 4.4% in August as 331,000 Americans went out of unemployment. Job creation and unemployment rate are seen by investors as one of the main indicators of consumer spending, which accounts for the majority of economic activity in the United States.

EUR/USD traded at 1.1692 as of 14:15 GMT on Friday after dropping to 1.1680 at 12:40 GMT, the pair’s lowest level since July 28. EUR/USD began trading today at 1.1710.

The Dollar Index, which measures the strength of the US currency against a basket of its major peers, rose to 94.17 as of 14:12 GMT today from 93.96 yesterday. The index touched 94.20 at 12:50 GMT today, the highest level since July 20.

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