Over the past 17 months, the common European currency has lost significant value against the US dollar. This has fueled fears that inflation in the European Union could worsen, as investors face political uncertainty and France’s high debt at the same time.
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The euro fell to a 17-month low against the dollar as markets voiced concern about rising government bond yields and higher oil prices.
The euro has continued to decline against the dollar for most of this year. On Monday, the exchange rate fell to $1.12, its lowest level since the beginning of 2025.
According to Ricardo Amaro, chief eurozone economist at Oxford Economics, the euro’s weakness has been driven by investors revising their expectations for US Federal Reserve (Fed) policy. The institution is facing pressure to raise interest rates at a time when bond yields in global markets have risen.
Amaro says the latest waves of euro selling have been driven in particular by concerns about the situation in France, where “investors are preparing for a higher fiscal risk.”
Last week, sales of French bonds intensified as doubts grew about the long-term sustainability of the country’s public finances.
The yield on France’s 10-year bonds, which reflects the government’s borrowing costs, reached 5% before edging down slightly. France has long faced structural problems with its finances.
Since President Emmanuel Macron took office in May 2017, public spending has increased, while substantial tax cuts have also been implemented.
As a result, France’s national debt has grown by more than 1 trillion euros, and the debt-to-gross domestic product ratio has reached almost 118%.
