The euro fell to a 17-month low on Monday as growing concerns over France’s debt and political uncertainty put renewed pressure on European financial markets.
The currency dropped as low as $1.1161, its weakest level since May 2025, before recovering slightly. Investors have become increasingly concerned about France’s ability to control its budget deficit as the government faces a divided parliament ahead of next year’s presidential election.
French government bonds have also come under heavy selling pressure. The yield on 10-year French debt has climbed close to 5 per cent, while the gap between French and German 10-year borrowing costs has widened sharply. The spread briefly reached its highest level since the eurozone debt crisis, signalling rising investor concern over France’s fiscal position.
The pressure on the euro comes despite weaker-than-expected US employment data, which has sharply reduced expectations of a Federal Reserve rate increase in October. Markets are now pricing in less than a 20 per cent chance of an October hike, supporting demand for safer assets and limiting the euro’s recovery.
The developments leave European markets facing a difficult combination of high borrowing costs, elevated energy prices and political uncertainty. Investors are watching closely to see whether France can secure enough political support for its 2027 budget.
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