Euro Hits 17-Month Low as French Crisis Rattles Currency

The Euro experienced a sharp decline against the US Dollar at the start of the trading week, falling to $1.1161 per Euro, its lowest point since May 2025. This downturn is attributed to growing concerns over France's fiscal health and political instability within the country.

The pressure is also evident in the bond market, where the yield on France's 10-year government bonds reached 4.96% on October 1st, the highest since July 2002. The spread between French and German bond yields has widened to approximately 140 basis points, following the sharpest weekly increase in 17 years.

These concerns are not solely market-driven. The European Commission's May forecast projects France's debt-to-GDP ratio to rise from 115.6% in 2025 to 118.1% this year and 120.2% by 2027. The deficit is expected to reach 5.1% of GDP this year, increasing to 5.7% next year.

Concurrently, the US Dollar is strengthening due to demand for safer assets and higher yields in the United States. This is occurring despite weaker US employment data, which has reduced the probability of an interest rate hike in October to less than 20%, down from over 60% the previous week.

The Euro's weakness is also felt in Israel, where it is trading around 3.40 shekels, down from the Bank of Israel's representative rate of 3.4419 shekels on Friday. While this represents a roughly 1% drop from the end of last week, much of the Euro's decline against the shekel stems from its global weakness rather than significant movements in the shekel itself. The Euro remains above its late May low of approximately 3.26 shekels.

Investors will continue to closely monitor the French market. Any further escalation of the debt crisis or political turmoil in Paris could increase pressure on the Euro, while a stabilization in the bond market might offer it support.