Euro tumbles as French debt fears spread across eurozone

The euro has become the latest concern for policymakers as rising French borrowing costs spread across the eurozone. On Monday, the euro dropped to 17-month lows below $1.12 and weakened against sterling, the Swiss franc, and the yen. The primary issue stems from France, where the government is struggling to pass an unpopular 2027 budget aimed at reducing its deficit and managing record-high debt. Political divisions ahead of next year's presidential election make this task even more challenging.

Investors, wary of the risks, have been selling off French bonds, leading to broader market unease. However, the euro rebounded on Tuesday, marking its strongest daily gain in a month after French bond yields pulled back slightly. The eurozone's currency climbed 0.28%, recovering from its lowest point in 17 months.

Despite the rebound, concerns about European public finances persist. ING has targeted a range of 1.1100-1.1120 for EUR/USD, warning that the euro's downside risks remain. The recovery on Tuesday followed a significant drop the day before, but the underlying fiscal issues remain unresolved.