• Catalans vote for independence in the contentious referendum on Sunday
  • 90% of voters are in favor of an independence state, the Spanish government rules out that a possibility 
  • Euro lower in early trading, Spanish bond yields soar following the voting

In defiance of opposition of the Spanish government, the independence referendum in Catalonia took place yesterday despite myriad police raids and riots seen on the streets. According to Catalan officials preliminary results of the voting have shown as much as 90% in favor of independence, it means that 2.26 million inhabitants of Catalonia chose ’yes’. Still 15k votes have yet to be counted, they won’t change a final fallout though. The turnout was 42.3%.

Sunday’s voting was passing tumultuously amid numerous clashes on the streets where at least 840 people and 33 police have been injured, including at least two people who were thought to have been seriously hurt. After the voting, Catalan regional leader Carles Puigdemont spoke out against the violence saying ““On this day of hope and suffering, Catalonia’s citizens have earned the right to have an independent state in the form of a republic.” He also added that “my government, in the next few days, will send the results of [the] vote to the Catalan parliament, where the sovereignty of our people lies, so that it can act in accordance with the law of the referendum.”

link do file download linkCatalonia accounts for up to 20% of national GDP growth, hence it’s a pivotal region for the Spanish economy. Source: The Guardian

Even as the overwhelming majority voted for forging an independence state, the government in Madrid condemned the referendum calling it illegal because it was organized just in Catalonia. In order to make it legal, it would have been conducted across the whole country. That said, it’s outstandingly unlikely that Catalan obtains what they want in the upcoming hours, as Puigdemont said. To sum up, some disputes have to be expected, though the voting should not have far-reaching consequences on the single currency.

link do file download linkThe EURUSD opened 30 pips or so lower in very early trading on Sunday. Source: xStation5

The EURUSD kicked off the week 30 pips lower on Sunday while the Spanish 10Y yield has started trading roughly 8bps higher compared to the close on Friday. It means that the Spanish risk premium has increased suggesting possible declines on the IBEX (SPA35 on xStation5). In turn, the euro is likely to head lower towards 1.1720 and if it’s determined to break it, it could open an ample way for fresh drops, 1.1450 might be attainable. Having said that, even as the EURUSD falls deeper going forward, it will be probably sped up by strength of the US dollar rather than weakness of the common currency. Either way, some political rifts across the euro area (Spain and Germany) could weigh on the euro in the short term.