The initial effect of Donald Trump's election to the White House seems to have run its course. While investors still expect his policies for tax cuts and infrastructure spending to be positive for the dollar in the longer run they were not sufficiently enthusiastic to continue buying the dollar a month after the vote. Despite the looming uncertainty of this weekend's referendum in Italy and presidential vote in Austria they still preferred the euro to the dollar: it strengthened by one US cent on the week.
Sterling did better than either of them, strengthening by one and three quarter US cents and touching a four-week high. Although the spectre of Brexit still stalks the pound investors are no longer so frightened of Britain falling off an economic cliff edge when the spilt finally happens. The Bank of England governor and the minister of Brexit both floated ideas to avoid that risk.
On the whole it was a better-than-average week for the euro, which strengthened by a cent against the US dollar and added half a Swiss cent. Economic data from Euroland were few and far between and those which did appear were unremarkable. The EU's confidence measures fell short of expectations but investors ignored them as usual. Inflation was on target at a provisional 0.6% while unemployment ticked down to 9.8%. Sterling had an eventful week, more than once lurching higher or lower for no apparent reason and eventually gaining a third of a euro cent.
The coming weekend brings a constitutional referendum in Italy and a presidential election in Austria. Italians are expected to reject Prime Minister Renzi's proposals for constitutional reform and Austria could quite well send the far-right Freedom Party candidate to the Hofburg Palace. Should they occur, both of those results would be likely to undermine appetite for the euro.
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