FX round-up: Euro at one-week high as investors shrug off Catalonia referendum

The euro climbed to a one week high on Thursday as Spain moved to suspend autonomy in the region of Catalonia.

Government officials said they would meet to invoke Article 155 of the constitution, allowing them to take over running of the region.

"The Catalonia thing is priced in now unless it blows up really badly and people seem to be happy going long euros before the ECB meeting next week," said John Marley, head of FX strategy at Infinity international.

The single currency traded 0.48% higher against the dollar to 1.1845. All eyes will now turn to the European Central Bank (ECB) meeting due next week where policymakers are expected to reveal plans to unwind their multi-year stimulus policies.

Against the pound, the euro gained some ground, thanks to dissapointing retail sales figures from the UK, with GBP/EUR down 0.59% to 1.1137.

The UK retail figures came in below expectations of -0.1% with a print of -0.8% which sent sterling plummeting against the greenback to a one week low with cable trading 0.11% lower by the late afternoon, after buying interest was seen at support of 1.3150.

"The world is watching the UK consumer at the moment to guage the response to Brexit developments and a possible shift in BoE rate hike expectations," said Neil Jones, Mizuho's head of hedge fund currency sales in London.

"The data is not encouraging and sends out alarm bells for sterling."

Across the pond in the US, the dollar index lost some ground, trading 0.26% lower to 93.117. The index ended a four-session winning run overnight on
lacklustre US data and was struggling to regain traction as 10-year treasury yields dipped 2 basis points as investors returned to the safety of bonds.

Despite the disappointing dollar performance, data from the US on Thursday showed unemployment claims were down to 222,000, lower than analyst expectations, while manufacturing increased, with a Philly Fed manufacturing reading of 27.9.

The weakness was clear to see against the Japanese yen with the pair trading 0.37% down to 112.53 by 1600 BST. The move lower came after the pair hit a day high of 113.15 in early morning trading.

One of the biggest winners of the day was the Australian dollar which managed to rally 0.43% against it's US counterpart, with the pair trading at 0.7880.

Unfortunately, it's Kiwi cousin did not fair so well, with NZD/USD trading 1.77% lower to 0.727 after the left-leaning Labour Party won the support of the minor nationalist New Zealand First party to form a ruling coalition.