Euro Heads for Steepest Weekly Fall Since May Amid French Fiscal Worries

The euro is set for its biggest weekly fall in months against the US dollar as concerns about France's fiscal trajectory and the Federal Reserve's hawkish shift weigh on sentiment.

After a sharp 0.77% decline on Thursday, the euro was stable on Friday, but down 0.05% to $1.1240 at 1127 GMT, with a weekly fall of 1.35%, its steepest since mid-May.

This is largely due to higher oil prices, which support the dollar as investors cut exposure to currencies of major energy importers like the euro and yen, more vulnerable to rising crude costs.

According to Jane Foley, senior forex strategist at Rabobank, France's budget and political backdrop have weighed on the currency, citing low European gas storage, high energy prices, competition from China, a weakened chancellor in Germany, and the risk of hybrid attacks from Russia as factors contributing to the euro's weakness.

The European Union discussed a French proposal on Friday to release diesel stocks in response to US pressure to cool surging prices, while euro zone inflation is likely to increase in the coming months, keeping pressure on the European Central Bank to raise rates.