So what impact will the French ‘no’ vote have on Euroland, a region already struggling from “sluggish economic growth”? asks Naomi Tajitsu on Reuters.com.
It seems the analysts are in two minds: some reckon the result cold “throw the euro zone into a political crisis” which would knock the currency lower, while weighing heavily on regional markets. Others said the French ‘non’ would have limited significance for investors. “It’s a bit of a disappointment in the longer term, I don’t think it changes much,” said Harvinder Kalirai of State Street Bank on Reuters.com.
On Monday, the euro slumped to a seven-month low versus the dollar. So should the euro prepare for a bumpy ride ahead? Not so, says Tajitsu; the fallout from the referendum is unlikely to result in more euro slides today, as the London and New York traders will not “push it significantly lower” as they return to their desks following bank holidays in both countries on Monday.
Moreover, while the French ‘no’ undoubtedly had a “downward effect” on the euro, the currency’s recent weakness can also be attributed to dollar strength as the Fed continues to hike interest rates in America, says the BBC.
Yet while the euro’s strength may not be in too much danger, the referendum result would have far-reaching effects in France. French employers’ federation Medef called for “urgent reforms to boost the economy” following the rejection, says the BBC. The danger, according to Medef is that pro-business reforms could stall, which would leave the country uncompetitive.
“A no vote was expected but the size of the rejection will cause a government crisis in France,” said Armin Mekelburg of Hypovereinsbank on the BBC.