Euro sinks to 17-month low as French debt fears spread

That's what happen when you don't help us bomb the sheet out of Iran.

Euro sinks to 17-month low as French debt fears spread

The euro touched $1.1160 on Monday, its weakest since May 2025, as French borrowing costs hit their highest level since 2002

By Cris Tolomia, Quartz Media

Updated October 5, 2026

The euro fell to a 17-month low against the dollar on Monday as mounting anxiety over France's fiscal position rattled currency and bond markets across the eurozone.

The euro touched $1.1160 in Monday's Asian session — its lowest point since May 2025 — before paring some losses to stand 0.68% weaker at $1.1176. The currency has now declined for four consecutive weeks.

France's public debt has reached 119% of its gross domestic product and is projected to rise toward 122%, with the government planning to borrow a record 340 billion euros in 2027, according to The Wall Street Journal, citing Maybank analysts. Yields on 10-year French government bonds hit their highest level since 2002 on Friday, while the spread between French and German 10-year borrowing costs ended last week at 140 basis points — a weekly gain of 34 basis points, the largest in 17 years, according to Reuters.

Political uncertainty is compounding the fiscal pressure. Spanish Prime Minister Pedro Sánchez called a snap election for November on Monday, amid protests over the country's housing crisis, adding to the instability already weighing on eurozone markets, according to CNBC.

Analysts warn the strains in France could ripple outward. "There are signs of contagion as the yields of other debt-laden peripheral eurozone economies surged higher as seen for Greece and Italy," Maybank analysts said in a research report, according to the Wall Street Journal. Brent Donnelly, who serves as president of foreign exchange trading at Spectra Markets, noted that a French politics trade widely anticipated to intensify ahead of the April 2027 presidential election had come sooner than expected. "It's not completely obvious what might fix things here as any budget promises made by the French government now are not super credible with a change of power coming soon," he told Reuters.

Barclays economists cautioned that France will probably fall short of its fiscal goals regardless of whether its draft 2027 budget clears parliament, according to CNBC. ING strategists argued that full passage of the budget would still leave France's underlying fiscal imbalances intact, because the deficit would be too large to put the country's debt burden on a downward path.

The turmoil has also complicated the outlook for the European Central Bank. Lee Sue Ann, an economist at UOB's Global Economics & Markets Research, wrote that the upheaval in French sovereign debt was feeding through to broader eurozone financial conditions and complicating the ECB's policy calculus, according to the Wall Street Journal. The dollar index rose 0.47% as investors sought safety in U.S. assets.