Euro plunges to 17-month low on French debt and political fears

The euro dropped to its lowest level in 17 months on Monday, fueled by rising concerns over France's high debt and political instability. The country's 2027 budget plan, unveiled last week, failed to reassure investors, who worry that government spending will remain elevated ahead of next year's presidential elections. Far-right candidate Marine Le Pen, seen as a fiscal populist, has a strong chance of winning, adding to the uncertainty.

French debt is expected to reach nearly 122% of GDP next year, despite planned spending cuts. The 10-year government bond yield surged to 4.8%, the highest since the 2011 eurozone bond crisis. Kathleen Brooks, research director at XTB, noted that the sell-off in French bonds and the euro signals growing investor skepticism toward Europe.

Adding to the turmoil, Spain's Prime Minister Pedro Sanchez called for snap elections after lawmakers rejected a housing relief bill. Patrick Munnelly, market strategist at Tickmill Group, said Spain's political risk further weakened the euro. Meanwhile, global stocks rose, with the Nasdaq and Dow near record highs, easing expectations of an imminent Federal Reserve rate hike.

In other news, oil prices dipped after G-7 countries and the International Energy Agency agreed to release 100 million barrels of diesel and crude oil to address supply concerns. Despite attacks in the Strait of Hormuz, Middle East oil exports have rebounded. However, Saudi Aramco's CEO warned that oil stockpiles are dangerously low as winter approaches.