With the Greek pensioners' bonus and the Italian banks' temporary liquidity discomfort quietly put to bed the euro went into the New Year looking steady, if uninspired. It ambled through the first week of 2017, enjoying some decent Euroland economic data without really celebrating them.

The purchasing managers' indices, which look at current and anticipated activity in the private sector, were mostly up on the month and better than forecast. Inflation was also higher than expected at a provisional 1.1%.

The European Commission said on Thursday that it would approve the Italian government's cash injection for the troubled lender Monte Paschi di Siena. It is not a bailout (for that would be prohibited by EU rules) it is "liquidity support" to tide it over a difficult patch. Investors had been fairly confident that, true to form, the EU would be able to cobble together a rescue for the bank so there was no reaction by the Euro.

Much of the talk last week surrounded the Italian referendum and although the referendum result had been fairly widely anticipated, there had been doubts that Prime Minister Renzi would carry through his earlier pledge to resign if he lost. This topical conversation continued and to nobody's great surprise Italians rejected Prime Minister Matteo Renzi's referendum proposals for constitutional changes last Sunday.  Investors' initial reaction was to mark down the Euro on Monday morning.  Then, within an hour and a half, they changed their minds and the Euro forged ahead even though Sig. Renzi's resignation increases the political uncertainty in Italy.

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.

If politics was the main driver for currencies at the end of last week, then it most certainly was again throughout the past five days. Wherever you were this week everyone had one eye on the US presidential election. It was an all but a steady introduction to the week for Europe; Germany reported a -0.6% monthly fall in factory orders while, for Euroland as a whole, retail sales were down by -0.2% and investor confidence improved by four and a half points to 13.1. Swiss inflation was steady at -0.2% and the Swiss National Bank's foreign currency reserves increased from SFr628bn to SFr630bn: they go up every month as a result of the SNB's interventions to sell the franc.

Last week ended on an average note for the euro, it was unchanged against the other dozen most actively-traded currencies. Over the last month the strongest performer had been sterling and by a good margin. Investors had taken a shine to the British pound, in the last week sterling gained an average 3.4% against the other dozen most actively-traded currencies.

The European Investment Fund (EIF) and Caixa Económica Montepio Geral (Montepio) have signed a guarantee agreement to provide EUR 20 million for small and medium-sized enterprises (SMEs) in Portugal. This agreement benefits from the support of the European Fund for Strategic Investments (EFSI), the heart of the Investment Plan for Europe.

Under the new agreement, Montepio will provide attractive loans to innovative SMEs and mid-caps over the next two years. EIF’s guarantee is provided under the “EU InnovFin finance for Innovators” initiative, backed by Horizon 2020, the EU Framework Programme for Research and Innovation. The transaction would not have been possible so soon without the backing of the Investment Plan. It follows the news on 24 October that the European Investment Bank (EIB) signed a EUR 20 million loan with Montepio, which was also backed by the Investment Plan.

If politics was the main driver for currencies at the end of last week, then it most certainly was again throughout the past five days. Wherever you were this week everyone had one eye on the US presidential election.
It was an all but a steady introduction to the week for Europe; Germany reported a -0.6% monthly fall in factory orders while, for Euroland as a whole, retail sales were down by -0.2% and investor confidence improved by four and a half points to 13.1. Swiss inflation was steady at -0.2% and the Swiss National Bank's foreign currency reserves increased from SFr628bn to SFr630bn: they go up every month as a result of the SNB's interventions to sell the franc.