Euro falls to 17-month low against the USD on French debt concerns

The euro fell to a 17-month low against the US dollar on Monday amid growing concerns over France's public finances. The currency dropped nearly 7% from its peak in late January, reaching a level not seen since early 2025. This decline followed heightened worries about France's mounting debt and fiscal challenges, which have raised fears among investors about the country's economic stability. The drop in the euro coincided with a broader trend of depreciation against the dollar throughout 2026, with the currency losing approximately 5% of its value since the beginning of the year. On Monday, the euro traded near $1.12, marking its weakest level in nearly two years. Analysts noted that the recent sell-off was driven largely by concerns over France's fiscal risks, with investors increasingly favoring safer assets such as German government debt. French 10-year government bond yields rose to a 5% level earlier in the week before easing slightly. These yields reflect the cost France must pay to borrow money within a decade, and their rise signals growing market unease. Since President Emmanuel Macron took office in May 2017, public spending has risen significantly while deep tax cuts have been introduced, leading to an increase in national debt exceeding €1 trillion. France's debt-to-GDP ratio now stands at nearly 118%, with annual budget deficits regularly surpassing 5%. Investor sentiment has been further influenced by low eurozone growth and surging energy prices. The widening gap between French and German government bond yields, reaching their highest level since the eurozone debt crisis, has become a key indicator of financial stability within the region. Some analysts suggest that the situation could escalate into a broader sovereign debt crisis unless measures are taken to stabilize markets. Calls for intervention have grown, with some urging the European Central Bank (ECB) to act to prevent concerns over France from evolving into widespread panic. Deutsche Bank's Jim Reid noted that the spread between German and French bonds became so extreme that a "mini-panic" was close to unfolding. Separately, global oil prices dipped as the G7 announced plans to release up to 100 million barrels of crude and diesel from emergency reserves. Brent crude futures fell to $101.05 per barrel, while West Texas Intermediate crude declined to $89.95. The decision follows increased oil exports from the Middle East, which have returned to pre-war levels, and ongoing tensions in the region. Despite these developments, supply concerns persist due to conflicts in Yemen and disruptions in production capacity expansion efforts across the Middle East.