The euro has plummeted to its lowest level against the US dollar in 17 months, driven by mounting investor concerns over France’s escalating debt and political uncertainties within the eurozone. On Monday, the single currency dropped approximately 0.8% to fall below $1.12, reaching its weakest point since May 2025. This latest decline marks a cumulative decrease of about 1.2% this month, following an eight-cent drop from its January peak of $1.20.
Central to investor apprehensions are France’s rising borrowing costs and the government’s initiatives to curb its budget deficit. French 10-year government bond yields have surged to their highest levels since 2002, and the spread between French and German borrowing costs has widened to its greatest extent since 2012. In response, France’s minority government has unveiled a €54 billion savings plan aimed at reducing the budget deficit from 5.5% of GDP this year to 5% by next year. However, political resistance and opposition to spending cuts have cast doubt on the feasibility of these financial containment efforts.
The situation is further complicated by Spain’s decision to call an early general election, adding another layer of uncertainty. Analysts have cautioned that the combination of political instability in France and Spain, coupled with concerns over sovereign debt, could exert additional pressure on the euro and pose broader risks across the currency bloc.