Euro Tumbles Hard As Ireland Says “No” To EU Treaty

The Euro has a big sell-off in the currency markets Friday, and that has to do with the Irish. Political integration of the European Union is vital to economic integration of the EU member states, which in turn will influence how investors perceive the Euro common currency. Early today, the EU Lisbon Treaty (which is about modernizing the EU’s decision-making process) has been rejected by Ireland, with the Irish Justice Minister Dermot Ahern saying on TV that the Irish have voted ‘No’. This treaty has to be approved and ratified by all 27 EU countries, and so far 18 have already ratified the treaty.

Ireland is now a roadblock to this European integration and could continue to be one as it is the only EU country that has to put the treaty to a popular ballot as required by its constitution, rather than it being approved through the parliament. This Lisbon Treaty replaces a draft constitution that was turned down by France and the Netherlands three years ago.

US Inflation Up The Most Since November

US inflation data released today by the government showed that headline price pressures are still persisting. The consumer price index rose 0.6% in May, slightly above the 0.5% rise forecast, and the core rate, which excludes food and energy, gained 0.2%, in line with expectations. Meanwhile, the preliminary Reuters/University of Michigan consumer sentiment survey for June indicated that US consumer confidence fell for the fifth straight month, moving to 56.7 in mid-June from 59.8 at the end of May. Consumers haven’t been feeling this pessimistic since May 1980 - but that we already know.

Forex Trading

The broad winner in the currency market has been the US dollar today. EUR/USD fell 80 pips from 1.5380 to 1.5300, and 1.5280 is the nearest support. USD/CHF rose to a near four-week high of 1.0540, with upside targets around 1.0560, 1.0590-1.0600. As for GBP/USD, it went up to 1.9500 and as expected, shorting interest was heavy there and it bounced 90 pips down to 1.9410.

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