Euro Mixed amid Clashing Fundamentals

The euro was mixed today, falling against the US dollar and the Great Britain pound, while rising versus the Japanese yen and the Swiss franc. The currency was supported by positive macroeconomic data and the outlook for an asset-purchase reduction, while dragged down by Europe’s political issues like the Brexit and separatism in Catalonia.

It is expected that Spanish Prime Minister Mariano Rajoy may take direct control over Catalonia, invoking Article 155. The problem is that such decision is likely to face fierce resistance from region’s separatist forces.

The European Central Bank will conduct its monetary policy meeting next week, and the general consensus is that the central bank will trim the size of its asset purchase program. Indeed, ECB Governing Council Member Ewald Nowotny signaled that the bank is indeed likely to cut asset purchases, though perhaps not too aggressively:

The question (next week) will be whether the program should be continued at the current intensity or whether hitting the brakes is called for. I think it would be dangerous to abruptly slam on the brakes. But I also think the ECB will slowly take its foot off the gas.

The German Producer Price Index rose 0.3% in September from August, exceeding the median forecast of a 0.1% increase. The eurozone current account surplus widened unexpectedly from €31.5 billion to â‚¬33.3 billion in August.

EUR/USD dropped from 1.1851 to 1.1781 as of 20:49 GMT today. EUR/GBP declined from 0.9003 to 0.8932. EUR/JPY edged up from 133.37 to 133.73.

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