Euro hits 17-month low against dollar: What's the reason?
What's the story
The euro has witnessed a major fall, with the currency hitting a 17-month low of $1.1161 on Monday. The decline is mainly due to concerns over France's record public debt and the challenging political landscape for budget cuts. These fears have overshadowed a strong US economy and dollar. The dollar index, which measures the greenback against other currencies, rose by 0.13% to 102.25 on Friday.
Market response
Euro's longest streak of weekly declines since early 2025
The euro was last down 0.1% at $1.1198, off about 0.5% on the week.
This marks its longest streak of weekly declines against the dollar since early 2025.
However, risk premiums on French and Italian government debt are likely to decline this week after a spike in late September, as investors await fresh developments before demanding higher compensation for fiscal and political risks.
Market fluctuations
Global bond markets stabilize
Global bond markets stabilized earlier on Friday as oil prices fell after US President Donald Trump said that the US would not attack Iran before midterm elections.
However, crude prices recovered from their lows after a vessel was struck by an unknown projectile near the UAE.
Meanwhile, US consumer sentiment further declined in early October due to rising living costs amid the ongoing Middle East conflict.
Political impact
French debt under pressure
French debt remains under pressure as politicians struggle to reduce the budget deficit ahead of a contentious election in 2027.
The announcement of a snap election in Spain earlier this week has also added to the euro's woes.
Despite these challenges, Sterling gained 0.08% to $1.3235 but is still on track for its seventh consecutive week of declines - its longest losing streak since November 2024.