Euro falls to 17-month low as Spain and France political uncertainty rattles markets

The euro fell to a 17-month low against the dollar on Monday, its weakest level since May 2025, as political and fiscal uncertainty in Spain and France weighed on the currency. Bloomberg reported the euro hit the low in Asian trading. UPI said the exchange rate briefly reached $1.116 before recovering slightly, leaving it down about 1.2% since Thursday and 6.66% since the start of the year. Axios said the euro fell below $1.12 and was down about 4% since Sept. 8. The Hill reported the euro at roughly $1.12 by mid-afternoon on the East Coast, against about $1.17 at the start of the year. [ 1 , 2 , 4 , 5 , 7 ]

In Spain, Bloomberg first reported that Spanish government officials were preparing for an early election, which it said added to concerns rocking France's bond market. In a later report, Bloomberg said Prime Minister Pedro Sánchez had called an early election amid mounting social protests over housing. Axios said the snap election is set for Nov. 29 and could strengthen Sánchez's position or open the door to a populist right government. The Hill also reported that Sánchez called a snap election for Nov. 29. [ 1 , 3 , 5 , 7 ]

On France, CNBC reported the country remains the “poster child” for Europe's sovereign market problems as mounting debt piles become more expensive to service. The government has presented a draft outline of its 2027 budget aimed at reducing the public deficit from 5.4% of GDP to 5% next year, and UPI reported the plan includes $60.6 billion in cuts to pensions and departmental spending budgets. Economists at Barclays said France is unlikely to meet its fiscal targets even if the plan is adopted in the coming months, adding that French fiscal and political developments cloud the euro area outlook. ING strategists said the budget, even if passed in full, would “not resolve France's structural fiscal problems”, because the deficit would remain too high to stabilise the debt ratio. [ 2 , 4 ]

The sell-off hit French stocks, with UPI reporting the blue-chip CAC 40 index trading 0.7% lower in mid-afternoon trade in Paris, and the yield on France's 10-year government bond under pressure over worries that a parliament without an overall majority next year could endanger efforts to narrow the deficit. The Hill said France's and Germany's 10-year bond yields closed at roughly 4.86% and 3.50% on Monday, dozens of basis points above where they stood before the U.S. and Israel launched their war on Iran in late February, and pointed to rising public debt and elevated energy costs during the conflicts in Iran and Ukraine. XTB research director Kathleen Brooks told The Guardian that Europe is taking the spotlight as fiscal and political concerns hit the bloc, with France the epicenter and Spain's early election adding to investor worries. [ 4 , 7 ]

Axios reported that rising borrowing costs and political instability are reviving concerns about strains within the eurozone, and whether the European Central Bank may eventually have to step in. It said France's rising borrowing costs echo the eurozone crisis of the early 2010s, though the ECB now has more tools to contain market stress. Axios also noted that in an opinion article Monday in the Financial Times, former ECB board member Lorenzo Bini Smaghi called for the central bank to suspend its quantitative tightening programme in light of stress on long-term rates. [ 5 ]

The Hill noted that a weakening euro strengthens the U.S. dollar in comparison, making European exports cheaper and potentially making American-made products more expensive in overseas markets, and cited a $220.3 billion U.S. trade deficit with the European Union last year. It cited CME Group's Richard Stevens writing on Sept. 25 that the dollar has shown relative stability this year, noting that persistent inflation led the Federal Reserve to raise interest rates by a quarter point last month. [ 7 ]