Monday’s trading confirmed the euro 17-month low against the US dollar, as deepening concern over France’s public finances and a fresh wave of eurozone political uncertainty rattled investors. The single currency dropped as much as 0.8% on October 5, 2026, touching $1.1161 in Asian trading — its weakest level since May 2025. The slide came alongside a rout in French government bonds and a surprise snap-election call in Spain, reviving memories of the eurozone sovereign debt crisis.
FAKTA
- Euro at $1.1161 in Asian trading on Monday, October 5 — its weakest level since May 2025, a 17-month low.
- Down about 0.8% intraday; the fourth straight weekly decline; the currency has lost roughly 2.5% in September.
- The euro also weakened 0.5% against the Swiss franc and 0.39% against sterling; the dollar index rose about 0.5% to 102.39.
- France’s 10-year OAT yield surged to 4.9–4.95% on October 1 — the highest since 2002 and the biggest quarterly jump in nearly four decades.
- The OAT–Bund spread topped 150 basis points — the widest since the 2012 eurozone debt crisis.
- Spain’s Prime Minister Pedro Sánchez called a snap election for November 29 after parliament rejected two housing decrees on October 2.
- France’s Lecornu government plans €54 billion in savings in the 2027 budget to cut the deficit from 5.4% to 5% of GDP.
- Scope cut France’s credit rating from AA− to A+ in September; a record €340 billion of borrowing is planned for 2027.
The euro’s 17-month low: what moved the markets
The single currency slid sharply in Asian hours on Monday as fiscal worries in France, in the wake of a steep bond-market rout, stoked contagion fears across the region. The euro sank to as low as $1.1161, its weakest since May 2025, before paring some of the losses to trade around $1.1176. It was the fourth straight weekly decline for the currency, and the dollar held firm even as soft US jobs data dented expectations of a near-term rate hike.
“Don’t stand in front of the train,” said Chris Weston, head of research at Pepperstone, warning against betting on a quick rebound, adding there was “possibly a whiff of contagion creeping in.” Brent Donnelly of Spectra Markets said the French politics trade many expected to escalate this winter, as April 2027 elections near, is here now. Read the same story on our main site and more coverage in our World section.
French bond rout behind the euro 17-month low
France’s 10-year borrowing rate climbed to 4.94–4.95% at the start of October — a level last seen in 2002 and the strongest quarterly increase in nearly four decades. The premium investors demand to hold French 10-year bonds over safer German Bunds shot above 150 basis points on Friday, the widest since the euro-area debt crisis, amid a global bond selloff. French OAT futures slipped while German bund futures edged higher.
The weakness spurred concerns that France’s troubles could spread across the eurozone as they did more than a decade ago, potentially forcing the European Central Bank to help shore up French debt. Some analysts cautioned it is still too early to judge contagion risk. Ninghui Liu of State Street Investment Management said France’s fiscal position was becoming increasingly unstable, noting the market had only been reacting since last week.
Spain’s snap election adds to the strain
Adding to the prevailing instability, Spanish Prime Minister Pedro Sánchez called an early general election for November 29, 2026, after a fragmented parliament rejected the government’s key housing decrees last week amid widespread protests. In a televised address he said Spain needed to “renew people’s support” and win a larger progressive majority.
The lower house voted down the two decree-laws on October 2 — measures drawn up in response to the housing crisis — with the conservative People’s Party, Vox and Junts among those voting no. Opinion polls suggest a coalition led by the People’s Party with the support of Vox is the most likely outcome, which would usher a far-right party into central government for the first time since the return of democracy.
Lecornu’s €54 billion test ahead of April 2027
Prime Minister Sébastien Lecornu’s minority government has unveiled plans for a €54 billion savings initiative in the 2027 budget aimed at bringing the deficit down from about 5.4% of GDP to 5%. The package targets pensions, public-sector pay and other politically sensitive spending, while extending a one-off tax on large companies.
Investors are watching closely ahead of April’s presidential election, with concerns that a fragmented parliament and gains for the far-right National Rally could derail fiscal consolidation. Growth is expected at just around 0.5% in 2026, the debt burden is set to exceed 120% of GDP next year, and the fiscal watchdog has warned the budget’s economic assumptions are “optimistic.”
Conclusion
The euro’s drop to a 17-month low underscores how quickly France’s fiscal stress has become a market-wide problem. With French borrowing costs at their highest since 2002, the spread over Germany at its widest since 2012, and political risk rising on two fronts — Paris and Madrid — investors are pricing in a winter of uncertainty. Whether the slump marks the start of a broader eurozone contagion will depend on how convincingly France’s government can hold its budget together before April’s election.
