Euro Plummets as French Debt Fears and Political Uncertainty Grow

The euro sank to a 17-month low against the dollar on Monday, driven by growing concerns over France's soaring debt and budget deficits. French debt is expected to reach nearly 122% of the country's gross domestic product next year, despite planned spending cuts. Investors reacted negatively to the government's underwhelming 2027 budget plan, which raised fears of persistent high spending ahead of next year's presidential election, where far-right leader Marine Le Pen could emerge victorious.

The uncertainty pushed the yield on France's 10-year government bonds to 4.8%, the highest level since the 2011 eurozone debt crisis. Kathleen Brooks, research director at XTB, noted that the sell-off in French bonds and the euro indicates a broader disenchantment with Europe among investors. Spanish Prime Minister Pedro Sanchez's call for snap elections added to the unease, further weighing on the euro.

Meanwhile, global stock markets showed mixed performance. The Nasdaq and S&P 500 climbed, with the Nasdaq hitting another all-time high after weak U.S. jobs data eased expectations of an imminent Federal Reserve interest rate hike. The Dow Jones Industrial Average, however, dipped slightly. Paris stocks fell, led by a nearly 10% drop in Schneider Electric shares following its $22.6 billion acquisition of U.S. engineering software specialist PTC.

Lower oil prices provided some relief, as Group of Seven countries and the International Energy Agency agreed to release 100 million barrels of oil to address supply concerns stemming from the U.S.-Iran war. Despite attacks on ships in the Strait of Hormuz, Middle Eastern oil exports, excluding Iran, surpassed prewar levels. However, Saudi Aramco CEO Amin Nasser warned of 'scarily thin' oil stockpiles as the European winter approaches.