Euro Falls to 17-Month Low Amid French Fiscal Concerns

The euro dropped sharply on Monday, hitting a 17-month low as concerns over France’s fiscal troubles and political instability ahead of next year’s election weighed heavily on the currency. The euro fell to as low as $1.1161, its weakest level since May 2025, after four consecutive weekly declines. The single currency was last trading down 0.67% at $1.1178, while also weakening against the Swiss franc and sterling.

Brent Donnelly, president of foreign exchange trading at Spectra Markets, noted that the political situation in France is escalating as the April 2027 elections approach. He added that budget promises made by the French government are not credible with a change of power imminent. The bond market rout last week further fueled concerns, driving global borrowing costs to multi-decade highs and pummeling French debt.

The US dollar benefited from these developments, with the dollar index rising 0.47% to 102.37. Matthew Ryan, head of market strategy at Ebury, explained that the rise in Treasury yields and global debt selloffs are boosting the appeal of US assets and driving safe-haven flows into the greenback. The yield on US 10-year Treasury notes was at 5.262%, down from a 24-year high last week.

Meanwhile, traders have adjusted their expectations for Fed rate hikes following softer-than-expected US jobs data. There is now a 78% chance of the Fed holding rates steady in October, up from 36% a week earlier. Analysts, however, believe the market’s pricing for future rate hikes is too aggressive, with Jefferies strategist Mohit Kumar predicting only one hike each from the Fed and the European Central Bank by March 2027.