Euro sinks to 17-month low as French fiscal woes spur contagion fears
TLT•The euro fell to $1.1161, its weakest level since May 2025, as French fiscal concerns and political gridlock fears raised concerns about contagion. The dollar index rose 0.47% to 102.37, while traders priced a 78% chance of the Federal Reserve holding rates steady in October.
1. Euro weakens on French concerns
The euro slid to a 17-month low on Monday as worries about France’s debt and political gridlock ahead of next year’s election stoked fears that fiscal strains could spread across the region. It fell as low as $1.1161 and was last down 0.68% at $1.1176, while also weakening against the Swiss franc and sterling. Some analysts said it was too early to judge whether contagion risk was growing.
2. Bond markets and dollar
French bond futures dipped 0.22%, while German Bund futures rose 0.1%. The premium on French 10-year borrowing costs over Germany’s ended the previous week at 140 basis points, after a 34-basis-point weekly increase, its largest in 17 years. The dollar index rose 0.47% to 102.37, supported by higher Treasury yields and safe-haven demand, while soft U.S. jobs data reduced near-term rate-hike expectations. Traders priced a 78% chance that the Federal Reserve would hold rates steady in October, compared with 36% a week earlier.
