Euro falls to 19-month low on French fiscal, political risks

The single currency traded 0.6% lower at $1.1164 as of 0700GMT on Monday, hitting its lowest level against the dollar since March 2025 as investors reacted to sharp swings in French government bonds and a firmer greenback. Pressure on the euro intensified following Friday's volatility in Paris debt markets, where the spread between French and German 10-year yields widened to as much as 159 basis points before narrowing to around 141 basis points by the close.

French borrowing costs climb

France's 10-year bond yield briefly approached the 5% threshold on Friday, reflecting increased investor demand for compensation to hold French debt amid concerns over the country's fiscal trajectory. The widening gap between French and German borrowing costs — a key indicator of perceived risk in eurozone sovereign debt — has raised fears that fiscal strains could spread to other heavily indebted member states ahead of the 2027 presidential election.

Dollar strength compounds weakness

A firmer dollar added to the single currency's decline, with the US currency strengthening despite softer-than-expected employment data and reduced expectations of a Federal Reserve interest-rate hike this month. The divergence in transatlantic monetary policy outlooks has exacerbated pressure on the shared currency as investors seek refuge in dollar-denominated assets during periods of European political uncertainty.