UK Vetoes Treaty- Markets not Convinced Big foreign exchange decision? Just ask Expert Analyst Samual Allen for a Quote » please click here ? The euro showed muted reaction to an agreement by European leaders for tighter euro zone budget rules, which did little to change investors' view
that there would be no quick-fire solution to the euro zone debt crisis.
Italian bond yields have continued to rise to above unsustainable levels.
The single currency initially dropped in value as the market digested the agreement, before clawing back losses on speculation the European Central Bank was buying bonds issued by debt-stricken Italy.
The treaty seems has turned out to be a non event, very little action has been agreed, they have however resolved themselves to action in the future which is something. The UK have vetoed the treaty leaving the pound to fair for itself.
Some analysts said the euro was finding some support on Friday as many investors, including hedge funds, had closed their books for the year and were not taking on big positions in general.
Fund repatriation by euro zone investors who need to reduce their foreign assets to bolster their balance sheets has also provided support to the single currency, they added.
While EU leaders agreed stricter budget rules for the euro zone early on Friday, they failed to secure changes to the union's treaty covering all 27 member states, meaning a deal will only include the euro zone's 17 members, along with any others who wish to join.
Investors were also pessimistic about plans to lend an additional 200 billion euros to the IMF to help bail out weak euro zone countries, viewing it would not be enough funding power to shield larger countries in trouble.
Many analysts said the single currency may encounter more selling pressure if further progress is not seen to be made at the summit, which continues on Friday.
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