For Ireland and its exporters, however, it has been little short of a godsend, analysts say.
Irish exporters who sell goods and services into Britain have been inundating currency desks of major banks here with queries about whether or not to lock in gains from their sterling payments of the past week. The uncertainty of the Greek crisis has helped to keep a lid on the euro for another week.
Exporters into Britain tend to be labour-intensive, Irish-owned companies which, between them, employ substantially more people than multinationals based here. Any fall in the euro against the sterling enormously boosts their competitiveness because it makes selling goods a lot cheaper in Britain.
Sterling has already soared by over 10% against the euro in the past year. That is good news for exporters and probably for new jobs, but is less so for holidaymakers travelling to the North or to London.
“There is no doubt that sterling has been supportive, because it is very good news for exporters,” said Philip O’Sullivan, chief economist at Investec Ireland.
Interest rate differentials between the Bank of England and the much lower rates set by the ECB will likely play a big role, along with Greece, in keeping the euro weak against sterling.
Investec Ireland projects that the euro will continue to track lower against sterling in the next three months. It then sees it falling to as low as 67.5p through the first three months of next year.
The Irish Purchasing Managers’ Index, which slowed a further rise in June, will likely expand further this year if the Greece crisis is contained, Mr O’Sullivan said, with the “single currency’s continued weakness against both the dollar and sterling [auguring] well for exports to the US and UK, two critical markets for Irish exporters”.
Analysts said markets were yesterday sensing some sort of compromise would be struck between Berlin and Athens over another bailout request from prime minister Alexis Tsipras and his finance minister, Yanis Varoufakis.
There was also some speculation about whether Sunday’s referendum would even go ahead.
Nonetheless, with money flowing out of German bond markets and into peripheral bonds such as Spain and Italy, markets believe the Greeks, despite tight opinion polls, will not vote against the bailout on Sunday, analysts say.
Ryan McGrath, head of fixed income at Cantor Fitzgerald Ireland, described trading yesterday as “very tricky”.
“It looks like Tsipras was prepared to accept some of the bailout terms,” said Mr McGrath. “The peripheral bonds and Ireland rallied. And when Merkel came out and said she wanted the referendum anyway, that stopped the rally.
“The market is in a great deal of confusion of what the overall outcome of all this will be — that is reflected in that there has been no volatility and the volumes trading in the market are extremely light, volumes which in Ireland you would expect for a bank holiday.”
The yield on Ireland’s 10-year bond ended the day little changed, at 1.64%. The winners were Italy, which fell six basis points to 2.27%, and Spain whose 10-year fell five basis points to 2.25%. The yield on Germany’s 10-year bond rose 45 basis points to 0.81%
“If it is a no vote, it would mean that Mr Tsipras would not be able to accept any new terms,” said Mr McGrath. “It would make things quite difficult for him. It would mean they are out of a bailout programme. They have no cash backstop. Could the ECB carry on supporting the banks? It is very difficult to see any positive outcome if there is going to be a no vote.
“You have to think that the Greek people are going to vote yes.”
Meanwhile, Standard & Poor’s said the economic prospects of the wider eurozone were “at a tipping point” because finding a solution to the Greek debt crisis remained unpredictable.
“Because business and consumer confidence is a key factor in our baseline forecast for the next two years and a half, a ‘Grexit’ could easily weaken the up-turn we are currently contemplating,” S&P said.