Whilst all news media appears to be centred upon the UK and Brexit, the events happening in the European Union (EU) are largely being ignored.

However, these EU events are far more serious to the global economy and the EU, which centres around Italy.
The country's banking system is swamped with debt and the Italian Prime Minister, Matteo Renzi, has called a referendum that could see him ousted from power, akin to David Cameron.

In a result that could have been awarded by an Olympics boxing judge the euro and its partner-in-crime, the Swiss franc, became the week's unlikely major currency winners. The euro did nothing to earn its victory, which owed more to it keeping its head down than to having delivered any obviously punishing blows. Over the seven days the euro strengthened by half a cent against sterling and added two US cents.

The US dollar index – a measure of the value of the US dollar relative to the value of a basket of the other most actively-traded currencies – fell to its lowest level since July 5th following the release of weaker-than-expected GDP data on Friday. The US advance second quarter GDP growth came in at 1.2 percent, below the expected 2.6 percent; leading investors to question the likelihood of a Federal Reserve interest rate increase this year.

After its hour in the sun during last Thursday's European Central Bank press conference the euro rather faded into the background.  Friday's provisional purchasing managers' index readings from Germany and pan-Euroland were mostly better than forecast and IFO's survey of German companies found them more upbeat than expected.  The same went for the EC's own confidence measures, which were all unchanged or better on the month.  None made much difference to the currency.

Market Update - Global markets have now risen steadily across the board as the volatility spike following Britain’s surprise decision to leave the EU died down and investors realised that, although unexpected, the uncertainty of the terms of Britain’s future relationship with the EU need not undermine equity markets. As for the FTSE 100 it is now 5% above where it closed on 22nd June, though 6% down in terms of Dollar value (£ is 12% lower against the Dollar) and the FTSE 250 is only 3% below where it was on the same day. The FTSE 250 is a far better barometer of UK economic activity than FTSE 100 and many of the stocks that were hit hardest like the house builders such as Persimmon, Taylor Wimpey and Barratt made substantial gains as the new May government started to restore some stability.

There were more than a few shocks and surprises to unnerve investors, notably the attempted coup in Turkey and the International Monetary Fund's downgrade of its forecasts for global growth.

Investors had to choose between the euro's safe-haven qualities and its unwilling involvement in the Brexit showdown. They really could not make up their minds so the euro was on average just about unchanged against the other dozen most actively-traded currencies. It strengthened by three quarters of a cent against sterling and lost one US cent.

After a hesitant start last Friday the euro headed mostly higher against the US dollar. It was initially hampered by some unusually punchy US employment data which indicated the creation of 287k new jobs in June. However, the balancing factor was a downward revision to the previous month's data, such that only 11k new jobs appeared.
Investors decided the net result was not strong enough to encourage any early interest rate increase by the Federal Reserve so they became less enthusiastic about the dollar.

With the Brexit vote clouding the view investors found nothing to distinguish the euro from the US dollar or the Swiss franc. The euro was unchanged on the week against the franc and just a dozen ticks behind the dollar. Not surprisingly, the euro made further headway against the benighted British pound, strengthening by another three and a half cents to leave it more than 10% above its level on Referendum Eve.

The euro zone ecostats came in mostly above forecast. Purchasing managers' index readings for manufacturing and services were higher on the month, showing stronger - though still not exactly vibrant - growth in the private sector. Retail sales in Euroland were in line with expectations, rising by 0.4% in May to put them 1.6% higher than the same month last year.