Euro Hits 17-Month Low as French Risks Dominate EUR/USD

The Euro has fallen to a 17-month low against the US Dollar, hitting around 1.1160 before recovering slightly to 1.12. The decline is primarily driven by French fiscal and political risks, with Spain’s upcoming election adding a secondary layer of uncertainty. The EUR/USD pair has pierced the key 1.1185 Fibonacci projection, a level that could determine whether the downtrend accelerates. A decisive break below this level would strengthen the case for a medium-term bearish trend.

French bond yields have stabilized somewhat, but the Euro continues to weaken, suggesting that the market is pricing in French-specific risks rather than a broader Eurozone panic. The OAT-Bund spread briefly surged above 150 basis points before retreating, highlighting investor concerns about France’s fiscal position. Meanwhile, Spain’s political developments have not triggered comparable market stress, with Spanish equities remaining positive.

The technical breakdown of the 1.1185 level is critical. A confirmed break would indicate that the decline from the 1.2081 high is gaining momentum, potentially entering its strongest phase. While Fed hike expectations have eased, the Euro’s weakness suggests that French political and fiscal uncertainty is overshadowing interest-rate dynamics.

The distinction between France and Spain is clear: France is being actively priced for risk, while Spain is being monitored without significant stress. This selective repricing underscores the market’s focus on France’s fragmented parliament and the challenges of implementing fiscal reforms ahead of the 2027 presidential election.