The euro declined to a 17-month low against the US dollar on Monday, driven by growing investor concerns over France’s rising debt and political uncertainty across the eurozone. The currency fell approximately 0.8% to trade below $1.12, marking its weakest point since May 2025. This drop is part of a broader decline, with the euro losing about 1.2% in value this month after slipping from its January high of $1.20.
Investors are particularly worried about France’s increasing borrowing costs and the government’s attempts to curb the budget deficit. French 10-year government bond yields have soared to their highest level since 2002, while the spread between French and German borrowing costs has widened to its largest margin since 2012. The French government has introduced a €54 billion savings initiative aimed at reducing the budget deficit from 5.5% of GDP this year to 5% next year. However, political resistance to spending cuts has sparked concerns over the feasibility of these fiscal measures.
Adding to the uncertainty, Spain’s decision to call an early general election has further fueled investor anxiety. Analysts have cautioned that the political instability in both France and Spain, along with apprehensions regarding sovereign debt, could exert additional pressure on the euro and escalate risks throughout the eurozone.
The euro’s recent performance reflects the market’s cautious stance amid these political and economic challenges. As France grapples with its debt management strategy and the broader European political landscape remains volatile, the single currency may continue to face headwinds.