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The euro gained a bit more confidence to edge higher after Catalan leader Puigdemont called for dialogue instead of independence. Meanwhile, the U.S. dollar was stuck in limbo as fresh concerns regarding the Trump administration’s tax reform plan popped up.

  • Canadian housing starts down from upgraded 226K to 217K vs. 211K forecast
  • Canada’s building permits slid 5.5% vs. projected 0.9% drop
  • U.S. IBD/TIPP Economic Optimism index fell from 53.4 to 50.3 vs. 54.2 consensus
  • BOC policymaker Wilkins: Canada still vulnerable to household debt
  • Catalan leader Puigdemont deferred declaring independence to seek dialogue with Spanish gov’t

Major Events/Reports

Relief from Catalan independence

The mood was pretty tense in Europe throughout the previous trading session as market watchers were waiting to find out if Catalan leader Carles Puigdemont would push through with officially declaring independence from the rest of Spain.

Instead, Puigdemont simply said that he accepted the mandate of the people for Catalonia to become an independent state but said that they should seek dialogue with the Spanish government first. Sources also said that he and his allies planned on signing a declaration of independence but put this on hold. Puigdemont said:

“Based on the results of October 1st, Catalonia has earned the right to be an independent country and has earned the right to be listened to and respected.”

Furthermore, Puigdemont said that he assumes the “responsibility to declare that Catalonia should be an independent state in the form of a republic.” In response, Spanish Prime Minister Mariano Rajoy is expected to hold an emergency cabinet meeting this week to discuss the government’s next steps.

Mixed figures from Canada

Economic data from Canada came in mixed as housing starts beat expectations while building permits posted a steeper than expected fall.

In particular, housing starts fell to 217K in September, slightly higher than the estimated 211K figure. On a more positive note, the August reading was upgraded from 223K to 226K. Also, this marks the fourth consecutive month of stronger than expected housing starts data.

In contrast, building permits posted a sharper than expected 5.5% tumble versus the estimated 0.9% drop in August. The previous reading also enjoyed an upgrade from the initially reported 3.5% slump to just a 2.8% decline.

Meanwhile, BOC Governing Council member Wilkins also expressed some concerns about the level of household debt, particularly those concentrated among the youth and low-income families. She also cautioned that, while stress tests suggest that banks can withstand shocks, there is a set of individuals that are vulnerable to income or house price shocks.

North Korean jitters still in play

Another round of geopolitical risks came back to haunt the dollar as reports on North Korea’s ability to launch intercontinental missiles that could reach U.S. territory hit the airwaves.

There were also headlines on South Korean military planes flying over the Korean peninsula as a show of force, keeping traders on edge that Pyongyang might be provoked into a hostile response.

To top it all off, rumors swirled that North Korean hackers had been able to steal U.S.-South Korea joint military plans that involved removing leader Kim Jong-Un from power.

Major Market Mover(s):

EUR

The euro carried on with its climb from the latter part of the London trading session as the President of Catalonia refrained from mentioning secession in his speech.

EUR/USD advanced to 1.1825 (+0.21%), EUR/GBP popped up from a low of .8925 to .8945 (+0.14%), EUR/JPY climbed to a high of 132.81 (+0.18%), and EUR/CHF is up to 1.1514 (+0.12%).

USD

The Greenback was in a weak spot as traders pared their long holdings on setbacks to tax reform and another round of North Korean jitters.

USD/CAD edged down to the 1.2500 handle (-0.24%), USD/JPY is trying to hold steady around 112.30 (-0.18%), GBP/USD is up to 1.3218 (+0.22%), and NZD/USD is testing the .7100 handle (+0.40%).

Watch Out For:

  • 12:30 am GMT: Australia Westpac consumer sentiment index
  • 12:50 am GMT: Japanese core machinery orders (0.9% expected, 8.0% previous)
  • 1:00 am GMT: FOMC member Kaplan’s testimony
  • 7:00 am GMT: Japanese preliminary machine tool orders