The elections in the Czech Republic have gone largely as expected but things are far from over. Andrej Babis is also known locally as the 'Czech Trump' not only because of his personal wealth but also because of his Czech First anti-establishment populist views.
Unlike in the USA however, winning an election in a Parliamentary system doesn't necessarily guarantee control. Babis's ANO (Yes) party has won 29% of the vote so they will need to partner up with one or more of the other eight parties in order to form a majority coalition. The task will not be simple, especially since Babis has already stated that he will not work with some of the parties and vice versa.
These type of negotiations can sometimes go on for quite a while. For example, the Netherlands is only just getting their government in place this week after a deadlock elections more than seven months ago. Over in Germany, Chancellor Angela Merkel isn't expected to settle on a Government until some time next year.
In Japan, on the other hand, Shinzo Abe has won a two-thirds majority so will have no need for wheeling and dealing. He now holds more power than the emperor himself and is free to continue on his stated mission to aggressively devalue the Yen.
Today's Highlights
Catalonia's Move
ECB Next
HUGE Milestone for Bitcoin
Please note: All data, figures & graphs are valid as of October 23rd. All trading carries risk. Only risk capital you can afford to lose.
Market Overview
After the bloody referendum in the Spanish region of Catalonia, things have not died down. In fact, tensions have continued to heat up. Prime Minister Mariano Rajoy has now stated that he will soon strip the Catalonian Government of their power and hold a new election to replace the separatist local government of Carles Puigdemont.
The ball is now in the Catalan's court. Puigdemont has several options. He can himself call for a snap election in Catalonia or he can simply accept the one that Rajoy has forced on him. A third option would be to make a more aggressive push for independence claiming that Spain has just again violated their rights.
No matter what he decides to do it is unlikely to bring calm as the doors for negotiation are now shut. The EUR/USD is sinking this morning and now holding tight to temporary support (yellow) at 1.1750, if it passes there it could likely meet key resistance (red) at 1.1650.
More Powerful ECB
Of course, all the political updates we've mentioned above are minuscule when compared to the power of the European Central Bank.
The ECB's monthly injections of €60 Billion per month have been propping up the stock markets and keeping the Euro down for the past three years. This Thursday, the ECB is largely expected to give some sort of guidance on the future of their massive stimulus package.
We know that they have been talking internally about reducing the injections to €30 Billion as of January and to keep the program going at least until September. In normal market conditions, it's easy for them to leak these type of internal discussions to see their effect on the markets. But with all of the political uncertainty, their usual tactics may be less effective.
Here we can see the German Dax Index hesitating near it's all time highest levels. Is the hesitation due to governmental negotiations or the rumors of less stimulus going forward?
Bitcoin ATH
Celebrations could be seen across the eToro network over the weekend as Bitcoin reached another all time record high of more than $6,000 per coin. The overall market cap (price per coin times number of coins in circulation) has for the first time surpassed $100 Billion before pulling back.
This very significant milestone clearly cements the role of bitcoin in the future of our global economy. As more people learn about the technology and how to use it, the more useful and valuable it will become.
For those that say "blockchain without bitcoin" just take a look at this chart showing bitcoin's dominance over all the other cryptocurrencies in circulation...
The bitcoin network is all about consensus and at this time, the consensus is all about bitcoin.
Let's have an amazing week ahead!
eToro, Senior Market Analyst
Disclosure: This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.