Euro Plummets to 17-Month Low Amid French Fiscal Concerns

The euro hit a 17-month low on Monday, driven by growing concerns over France’s fiscal situation and a sharp selloff in French bonds. The single currency dropped to $1.1161 in Asian trading, its weakest level since May 2025, after four consecutive weekly declines. Investors are increasingly worried about France’s rising borrowing costs and political uncertainty ahead of the April 2027 elections.

The euro’s decline also reflected broader market volatility, as a global bond selloff last week pushed borrowing costs to multi-decade highs. French government debt was particularly affected, with bond futures falling 0.13% on Monday. The euro weakened 0.4% against the Swiss franc and 0.34% against sterling.

The dollar strengthened despite weaker-than-expected U.S. jobs data, with the dollar index rising 0.47% to 102.37. The yield on 10-year U.S. Treasury notes stood at 5.262%, easing after reaching a 24-year high last week. Rising Treasury yields have made U.S. assets more attractive, while global debt market selloffs have boosted demand for the dollar as a safe haven.

Analysts expect currency market volatility to persist due to diverging monetary policy outlooks, elevated bond-market volatility, and France’s fiscal challenges. While traders have reduced expectations for a Federal Reserve rate hike in October, they still anticipate increases in December and early 2027. Some analysts, however, believe market pricing may be too aggressive.