Euro Plunges to 17-Month Low Amid French Fiscal Fears
The euro tumbled to a 17-month low on Monday, falling as low as $1.1161 during Asian trading. This decline marked the currency's weakest point since May 2025, driven by concerns over France's fiscal stability and political uncertainty ahead of next year's election. The euro ended the day down 0.68% at $1.1176, while also weakening against the Swiss franc and sterling.
Analysts warned against expecting a quick rebound, with Chris Weston of Pepperstone describing the situation as a 'continuation of recent fiscal issues' and noting potential contagion risks. Brent Donnelly of Spectra Markets highlighted that France's upcoming elections could further destabilize the situation, as current budget promises lack credibility with a government change on the horizon.
The bond market turmoil exacerbated fears that France's troubles could spread across the eurozone, reminiscent of the debt crisis over a decade ago. Some analysts, like Ninghui Liu of State Street Investment Management, cautioned that it was too early to assess the contagion risk, though they acknowledged France's worsening fiscal instability.
Meanwhile, the dollar strengthened amid global debt selloffs and rising Treasury yields, which boosted the appeal of US assets. Despite softer-than-expected US jobs data, traders still anticipated Federal Reserve rate hikes, though expectations for an October hike had dropped significantly. The dollar index rose 0.47% to 102.37, reflecting its safe-haven status.