For now, there are only questions. But Mr. Market will soon demand answers.

In the meantime, reflection, speculation and finger pointing are in full swing in the wake of France’s emphatic rejection of the European constitution on Sunday. A complex and flawed document, to be sure, although its raison d’être can be boiled down to this: a tool for streamlining the cumbersome decision-making that now prevails in the European Union. Of course, the streamlining, such as it is, can only take place if the various member states approve it. But for the moment, the jury’s out on the allure of enhanced bureaucratic efficiency.
At best, the “non!” vote cast by the French on the referendum strikes a temporary blow for the forces of economic integration on the Continent. Does the result have legs? Only time will tell, but it’s possible that the French vote yesterday will trigger a more problematic and perhaps fatal dose to any momentum on taking the European Union to the next level. The next clue in this soap opera comes on June 1, when Holland casts its vote. EU supporters have their fingers crossed, although according to several polls the result may very well echo the message dispensed so strongly by the French majority yesterday.
A few observers are reading the writing on the proverbial wall. “There is a risk of contagion,” European Commission President Jose Manuel Durao Barroso told French LCI Television after the French voted by “no” by a 55% margin, Reuters reports.
Whatever comes, the European Union will go on as before for the foreseeable future, if not forever. But now there are questions, including, What does this mean for the euro?
There’s no immediate risk to Europe’s currency. Betting otherwise seems like a fool’s game at this point. But that won’t curb the doubts, which carry a bit more resonance in the wake of France’s resounding vote.
The dollar is sure to be a beneficiary of the doubts, at least in the short term. In fact, in early trading after the French vote the initial reaction of forex traders was to sell first and ask questions later. The euro dropped to a seven-month low against the greenback after the news hit the world’s markets. “The French result suggests people are skeptical about the EU and further enlargement,” says Armin Mekelburg, a currency strategist at HVB Group in Munich, Bloomberg News reports. The same article also quotes Guy Stern, chief investment officer of Credit Suisse Asset Management’s German business in Frankfurt: “We will have a problem with the euro. It could depreciate 5 percent to 10 percent.”
America’s trade and fiscal deficits suddenly look a bit less threatening next to the quandary that the French have imposed on the euro, not the least of which is the question: will France or some other euro country ultimately pull out of the currency? The dollar has its troubles, but at least no one’s worrying that California’s going to quit the greenback and give monetary independence a whirl.
If such a threat, however remote, hangs over the euro, what can the EU do to depose such concerns? Not much, at least not until the French vote is thoroughly digested and its impact, if any, is revealed elsewhere in Europe.
Meanwhile, there are the questions. Lots of them. As the dollar’s challenges of recent years remind, questions can mean a lot when it comes to valuing currencies.