Europe Lower on Renzi Defeat but No Panic Yet

Another bad night for the European project on Sunday saw Matteo Renzi’s constitutional reforms rejected by a large margin, a vote that will bring an end to his tenure as Prime Minister and open the door to populist anti-eurozone party, Five Star Movement.

The loss itself won’t come as a massive surprise given the polling numbers prior to the vote, but the scale of the loss is certainly a concern. In making this a vote on himself, Renzi gambled his political future on the hope that his popularity would see the referendum through but instead, he just became the latest casualty in a series of votes that has paved the way for anti-establishment movements to come to the fore.

Referendum Result

Referendum Result 2

Source – Bloomberg

This was always the biggest risk of the referendum and is also the reason for the risk aversion we’re seeing in the markets this morning. European equity markets are expected to open in the red this morning, particularly in Italy where we may see fresh pressure on the banks which have already been battered on numerous occasions this year.

NFP Hodge Podge

The damage in the euro has actually been quite well contained when you consider what this vote could mean for the euro area as we head into what has become an even bigger election year. Having fallen to the lowest level since March last year against the dollar, it has since stabilised around 1% down on the day.


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This may reflect the fact that a Renzi defeat was already broadly priced in but it’s also a reflection of the fact that the next steps are far from clear for Italy and traders are not panicking yet. It may become clearer what this vote actually means in the coming weeks and for now, the ECB will be there to ensure borrowing costs don’t spiral out of control.

Vigilant ECB Ahead of Italian Referendum And European Rate Statement

Throughout the day today, we’ll get services PMI data from the euro area as well as the UK and the US. We’ll also hear from three Fed officials as the head into the blackout period before the meeting, with markets all but pricing in a rate hike next week.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.