Euro Hits 17-Month Low Amid Political and Fiscal Uncertainty

The euro continued its decline, hitting a 17-month low as political instability and fiscal worries across the eurozone intensified. The currency dropped to $1.1219 in Asian trading, extending last week's 1.2% fall. Against the British pound, the euro also weakened, losing over 1% in the previous week.

The euro's struggles stem from high debt levels in France and political gridlock, compounded by an upcoming snap election in Spain. Rising French borrowing costs are raising concerns for policymakers, as the weakening euro adds to economic pressures.

Joseph Capurso, a strategist at Commonwealth Bank of Australia, expressed pessimism about the euro's prospects, predicting it could fall below $1.10. He noted that a significant drop in oil prices, higher expectations for European monetary policy tightening, or fiscal discipline could reverse the trend, though he deemed the latter unlikely.

Meanwhile, the dollar continued its upward trajectory, supported by elevated US Treasury yields. The dollar index reached 102.17, near an 18-month high. Analysts at Barclays suggested that despite weaker US jobs data, inflationary pressures persist, keeping the Fed on track for further rate hikes.