After months of campaigning and ensuing result uncertainty, referendum – or neverendum – week was finally upon us. Such has been the level of global interest surrounding this historic vote that most other market influencing variables took a back seat to what has been described as ‘the biggest decision in a generation’.
As the week commenced the pound was trading an average of 1.6% higher against the other dozen most actively-traded currencies, compared with last Friday mornings opening levels, having been stimulated by a swing from Leave to Remain in the latest opinion polls. Consequently the pound picked up a half euro cents.
In terms of the bookies outlook on proceedings, the odds were increased against Britain Leaving the EU to 3/1 while Remaining was the odds-on favourite in this two-horse race at 1/4. Having sent sterling sharply higher at the beginning of referendum week, investors backed off the gas, allowing the pound to remain fairly comfortably within the upper reaches of its daily range.
Anti-Brexit sentiment emanating from opinion polls may have been good news for the pound but it was hampering the single currency, which was languishing at the back of the pack having lost another cent to a buoyant sterling. The opinion-poll-driven euphoria that began at the weekend was enormously helpful to the pound, taking it an average of 3% higher over the first three days of the week. However, it has not been enough to offset the losses suffered by the pound earlier in the year. Sterling is still down by an average of -5.5% from its position on 1 January.
The referendum easily overshadowed the ecostats: none was of great importance; Canadian retail sales increased by 0.9% in April, slightly more than expected; Euroland consumer confidence was roughly steady at -7.3; US existing home sales were up by 1.8% in May, as forecast; Rightmove put the average asking price for a UK house at £310.5k in June, about £100k more than the average selling price. Federal Reserve chairperson Janet Yellen made her second visit to Congress, this time to face the House Financial Services Committee: she had nothing new to say about monetary policy.
It will not go down as the best ever week for the euro. Until Thursday it was not doing too badly, up by nearly one US cent. Over the six days it lost four cents to sterling, which was riding a wave of optimism that Britain would vote to Remain in the EU. However, it soon became clear that Brexit was no longer an unexpected possibility but a reality, as the Leave campaign secured a narrow 51.9% majority on Friday morning, before David Cameron said he would resign as prime minister.
Sterling bore the brunt of investors' anguish, dropping 15 cents against the US dollar, but the euro suffered too with a four-US-cent drop. On the week as a whole the euro is four and a half cents higher against sterling and three cents lower against the dollar. Whilst Britain's decision to Leave is plainly bad for the pound it is also negative for the euro, which could now face an existential crisis.
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