Euro Dips to 17-Month Low Amid France’s Debt and Political Concerns

The euro has come under significant pressure this week, with the EUR/USD pair dropping to a 17-month low near 1.1161. This decline is driven by growing concerns over France’s debt and political uncertainty, which have eroded investor confidence in the currency.

France’s budget deficit remains high, with debt levels among the highest in the euro area relative to GDP. The country is already under an EU excessive deficit procedure, and its deficit is expected to stay close to 5% of GDP next year. The bond market is reflecting this stress, with the spread between French and German 10-year borrowing costs reaching around 140 basis points, the largest weekly increase in 17 years.

The political landscape ahead of France’s 2027 presidential election adds another layer of uncertainty. Investors are questioning whether the government can realistically reduce deficits without triggering a political backlash. The European Central Bank’s limited ability to intervene further complicates the situation, as the current borrowing-cost increase stems from genuine fiscal concerns rather than market disorder.

The euro is also struggling due to a lack of support from the U.S. side. High U.S. Treasury yields continue to make the dollar attractive, even after softer U.S. employment data reduced expectations for an October Federal Reserve rate hike. Safe-haven flows into the dollar have added additional pressure on the EUR/USD pair.

Technical analysis of the EUR/USD chart shows a weak structure, with the pair trading well below its 200-day moving average near 1.1553. The RSI is near 27, indicating oversold conditions, which could lead to a short-term bounce. However, the broader trend remains bearish, with key support levels at 1.1150 and 1.10. Resistance levels to watch are 1.1250-1.1300, 1.1400, and 1.1550.