The first trading day of the week comes with lack of fundamentals across the board, whether in Asia, Europe and the US session.
However, over the weekend, there were some events that likely to increase the volatility across the day, including the political unrest in Spain and the outcomes of the upper house election in Japan.
Japan Upper House Elections
Despite all of the reports that showed a notable deterioration of Shinzo Abe Government approval rate, the weekend’s election outcomes showed exactly the opposite.
Japanese Prime Minister Shinzo Abe's coalition has won a resounding victory in Sunday's general election, according to exit polls.
Mr Abe announced the election on 25 September, saying he needed a fresh mandate in order to deal with the "national crises" facing Japan.
A win in the election raises Mr Abe's chances of securing a third three-year-term as leader of the LDP when the party votes next September.
That would give him the opportunity to become Japan's longest serving prime minister, having been elected in 2012.
Spain Political Unrest To Rise Further
Spanish Prime Minister Mariano Rajoy announced earlier on Saturday he would invoke special constitutional powers to fire the regional government and force a new election to counter the region’s move towards independence.
Catalan President Carles Puigdemont, who made a symbolic declaration of independence on Oct. 10 after a referendum to secede, called Rajoy’s moves the “worst attacks against the people of Catalonia” since Spain’s military dictatorship.
The Senate vote that would give Madrid full control of Catalonia’s finances, police and public media and curb the powers of the regional parliament for up to six months is scheduled for next Friday.
Earlier this morning, Spain’s deputy PM said that the central government has not had any contact with Catalan regional government since Saturday. He also said that the central government may choose a single representative to govern Catalonia temporarily.
Moreover, he also said that Catalan leader will lose all powers, stop receiving salary, once the senate approves a direct intervention.
What Does It Mean
Japan’s elections is already behind us, but it means a lot to the market. Nikkei 225 surged by more than 1.1% today as Shinzo Abe is still promising for further stimulus packages. Nikkei 225 is now at the highest level since 1998, while the Japanese Yen declines all the way to 114.0, which is the lowest level against the Dollar since July.
Yet, such impact is likely to continue over the coming hours, with a possibility to break above 114.0, which would clear the way for further gains toward 114.30’s and maybe 114.70.
As for Spain unrest, it’s all about the Euro. Despite the fact that that the Euro began the day higher, it declines all the way back to its daily low.
However, the political unrest in Spain is likely to escalate over the next few days, especially with the intention of the direct action in Catalonia according to the latest statement by the PM. Therefore, the Euro is likely to be under pressure, at least until the ECB decision later this week. For the time being, we will keep an eye on 1.1725, which remains a solid support until this report is released.
Edited by:
Nour Eldeen Al-Hammoury
Market Analyst
