I find it more than coincidental that as and when global equities started a descent in early March this year, so too did the polls in France turn from being positive to the EU, to negative.

And during the March-May period, without checking further, I believe the French CAC-40 equity index ($CAC) began to outperform the rest of Europe and the Dow 30; and the USD started to outperform all other major currencies.

Yes, the USD is stronger this morning, to a 7-month high against the Euro, and strong against other major currencies; but relative to the Euro, the British Pound and Japanese Yen are also strong.

How will the French result and the one tomorrow by the Dutch, play out in capital markets? The bigger question is, how important really is this EU vote relative to direction of bond and stock prices, and gold prices?

The fundamental problems with the USD twin deficits and all have not gone away. I expect that current USD strength will, however, soon go away as all currencies depreciate against Gold.

The Europeans want a lower currency cross-rate to the USD, no matter how you slice and dice it i.e., EU or French Francs etc, because that helps exports and tourism and relieves the pressure on extreme unemployment in the region.

So too do the Americans, Canadians, Japanese, and Chinese (although the Japanese have other reasons). In other words, who doesn't want a globally competitive currency to help deal with other economic problems.

And yes, there are problems. They are not centred on the French, regardless of the words coming out of the White House today.

Gold is down almost US$3.00 this morning, but may be bottoming on the Daily data. I noted already that the goldminer stocks are relatively outperforming the gold bullion, as well as the USD, and I think that situation will continue until after the global forex imbalances are worked out.

For today, and maybe tomorrow, it's about forex. By Friday morning, we'll all have forgotten the EU issues and will be focused on the U.S. Jobs Report, noting along the way Wednesday's ISM Manufacturing Index and the Motor Vehicle Sales Report, and Thursday's reports of Factory Orders, and Productivity and Labor Costs.

In any event the result of the French vote on the EU was anticipated, and built into today's capital market prices. The rest of the week's U.S. economic data has yet to be.

Since equity markets and the USD have already had large percentage moves in the past four weeks, they need more fuel to keep the momentum going. Otherwise, there will be a pullback.

In terms of the EU vote-related move in the USD, I suspect that some hedge funds are in forex-related difficulties, and that the big U.S. banks are the ones getting nervous. Any major losses on their part will result in a rise in interest rates, and a very negative impact on the U.S. housing market.

In the meantime, as these issues are being resolved, I am noting a surge in the spin factor by U.S. media. There is clearly an attempt to push the Bush Administration agenda re China trade and Renminbi issues and WTO complaints against Airbus, which are directly linked.

It will be a good time to keep your eye on the tape, meaning that bond and stock price direction will be the most accurate indicator.

In the past couple days I read an informative report from James Puplava. You might enjoy it too.