Euro falls to 17-month low as French debt fears and Spain election add to eurozone uncertainty
The euro fell to its lowest level against the dollar in 17 months on Monday, as investors grew more concerned about France's debt position and wider political uncertainty in the eurozone. The single currency dropped as much as 0.8% in early trading to below $1.12, its weakest point since May 2025, before recovering slightly. French shares also came under pressure, with the Cac 40 index falling 1% even as some other major European markets were steadier or higher.
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Market moves were driven by worries that France's rising borrowing costs could make it harder for the government to manage its stretched public finances ahead of next year's presidential election. The euro has fallen about 1.2% this month and is now roughly eight cents below its January peak of $1.20. Investors were also reacting to the announcement of a snap election in Spain, which added to concerns about political instability across the currency bloc.
The sell-off in French assets comes after the yield on French 10-year government bonds last week reached its highest level since 2002 before easing slightly on Friday. The gap between French and German borrowing costs widened to its largest since 2012, when the eurozone sovereign debt crisis was at its height. That spread is closely watched by investors because it is often used as a measure of confidence in a country's fiscal position and broader financial stability.
The latest market reaction matters because France is one of the eurozone's largest economies and a central pillar of the single currency area. Any sustained rise in French borrowing costs can feed concerns about the bloc's fiscal resilience, especially when combined with political uncertainty in other member states. The move also highlights how quickly sovereign debt worries can spill into currency and equity markets, affecting confidence across Europe.
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France's minority government has already set out plans for a €54bn fiscal package aimed at addressing the budget deficit, but investors remain focused on whether those measures will be enough. The political backdrop is also important, with the presidential election approaching and the far-right National Rally gaining ground in parliament. In Spain, the snap election announcement followed the collapse of emergency housing legislation, adding another layer of uncertainty for markets watching the region.
What remains unclear is how far the euro's decline will extend and whether the pressure on French bonds will persist if political risks deepen further. Traders will be watching upcoming moves in bond markets, the euro's direction against the dollar and any fresh signals from Paris and Madrid. The key question is whether the current sell-off proves to be a short-lived reaction or the start of a broader reassessment of eurozone risk.
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