The euro has plunged to its lowest point against the US dollar in 17 months, driven by mounting concerns over France’s escalating debt situation and political instability within the eurozone. The currency fell approximately 0.8% to dip below $1.12, marking its weakest valuation since May 2025. This downturn adds to a 1.2% decline observed throughout the month, following a steep drop from its January peak of $1.20.
Investor anxiety centers on France’s growing borrowing costs and the government’s efforts to rein in its budget deficit. Recently, French 10-year government bond yields soared to their highest since 2002, with the yield spread between French and German bonds widening to levels not seen since 2012. In a bid to address fiscal challenges, France’s minority government has unveiled a €54 billion savings plan, aiming to reduce the budget deficit from 5.5% of GDP this year to 5% next year. However, political resistance to spending cuts has raised doubts about the feasibility of these financial reforms.
Adding to the region’s uncertainty, Spain’s decision to call an early general election has further unsettled markets. Analysts warn that the combination of political instability in France and Spain, coupled with ongoing concerns over sovereign debt, could exacerbate pressure on the euro and heighten risks across the eurozone.