Euro sinks to a 17-month low as worries over French debt and politics deepen
The euro fell to 1.1161 dollars in Monday’s Asian trading, its weakest level since May 2025, after four straight weekly declines. Investors are worried about France’s debt and political gridlock before next year’s election, and the previous week’s global bond sell-off had hit French government debt. The dollar index rose about 0.5 per cent even as bets on an October Fed rate rise faded, and most Asian currencies weakened against it.
Economics & Markets··Morning
Euro extends four weeks of losses
The euro fell to 1.1161 dollars in Monday’s Asian trading, its weakest level since May 2025, before recovering to 1.1178 dollars. At that later point it was still down 0.67 per cent. The currency had already recorded four successive weekly declines. France’s debt burden and political gridlock before the following year’s election were weighing on market sentiment, while investors also faced the effects of the previous week’s global bond sell-off. Sterling fell 0.24 per cent to 1.32064 dollars during the same Asian session.[1], [2]
French borrowing concerns spread through currencies
French government bond futures fell 0.13 per cent and remained close to the low levels seen in recent weeks. The broader sell-off had pushed global borrowing costs to multi-decade highs as investors weighed inflation risks from expensive oil. Brent Donnelly, foreign-exchange president at analytics firm Spectra Markets, said political pressure some traders expected nearer the April 2027 election was already affecting markets. He questioned the credibility of budget promises made ahead of a possible change in government.[1]
The euro also lost 0.4 per cent against the Swiss franc and 0.34 per cent against sterling. The dollar index, measuring the US currency against six major currencies, rose 0.47 per cent to 102.37. Ebury market-strategy head Matthew Ryan attributed support for the dollar to elevated US Treasury yields and investors seeking safety amid the global debt sell-off. US 10-year Treasury yields stood at around 5.26 per cent, below their temporary 24-year high the previous week.[1], [2]
Dollar gains even as October Fed hike bets fade
Weaker September US hiring had reduced near-term Federal Reserve rate expectations. CME FedWatch put the chance of unchanged October rates at 78 per cent, compared with 36 per cent a week earlier. Traders still anticipated a December increase and two more in the first half of 2027. Jefferies strategist Mohit Kumar instead expected one increase each from the Fed and the European Central Bank. OCBC strategists warned that prolonged rate volatility could keep pressure on the euro and on trades seeking returns from interest-rate differences.[1], [2]
