Euro Plummets to 17-Month Low Against Dollar Amid Eurozone Woes

The euro dropped to its lowest point in 17 months against the U.S. dollar on Monday, falling 0.6% to a level not seen since May 19, 2025. The decline was driven by growing concerns over Spain and France, which have spread across broader markets. The eurozone is grappling with higher inflation, rising interest rates, and increased government borrowing costs. Investors are particularly focused on additional vulnerabilities in Europe, such as sluggish growth, a fragmented bond market, and political uncertainty in key economies like Spain and France.

In Spain, Prime Minister Pedro Sánchez was expected to announce a snap election as protests over the country’s housing crisis escalated. Meanwhile, France is struggling with rising debt costs, though its government has proposed a 2027 budget aimed at reducing the public deficit from 5.4% of GDP to 5% next year. Barclays economists, however, doubt France will meet its fiscal targets even if the budget plan is adopted, citing weak fiscal fundamentals and political uncertainty ahead of next year’s presidential election.

ING strategists also weighed in, noting that even if the French budget is passed, it will not solve the country’s structural fiscal issues. They warned that the deficit will remain too high to stabilize the debt ratio, while aging-related spending and interest payments will continue to rise. This leaves the next government facing further difficult decisions.