Euro Plummets to Year Low Amid French Fiscal Turmoil

The euro experienced a significant decline against major currencies, briefly reaching its lowest point in over a year at $1.1185 against the dollar. The drop was driven by growing concerns over France's fiscal problems and political uncertainty, as protests continued to spread across the country.

During Asian trading hours, the EUR/USD pair weakened to $1.1223 before extending losses and breaking below the $1.12 threshold. The selling pressure on the euro was fueled by the widening gap between German and French government bond yields, reflecting heightened debt concerns in France.

The euro's decline affected other currency pairs, with notable drops in EUR/JPY to 176.64 yen, EUR/GBP to 0.8466 pounds, and EUR/CHF to 0.9291 francs. Meanwhile, the dollar-yen pair held steady around 157.80, supported by dollar buying triggered by the EUR/USD decline.

Protests in France, led by students and labor unions opposing the government's proposed spending cuts, intensified over the weekend. The budget debate is set to begin in the National Assembly on October 13, but the divided parliament and ongoing protests are expected to complicate its passage.

Markets are factoring in the risk of delayed fiscal consolidation and structural reforms in France, which could limit the euro's potential upside. Further political instability in France could exacerbate the German-French yield spread, putting additional downward pressure on the euro.

The focus for traders will be on France's budget deliberations and the spread of protests, along with broader eurozone economic indicators. A clear break below $1.12 in EUR/USD could lead to further declines, as the pair has already hit its lowest level since May of last year.