The euro fell 0.7% to 1.1177 dollars, hitting a 16-month low amid concerns over France’s rising public debt and political pressure on government spending. French 10-year bond yields climbed to their highest since 2002, while German yields dropped, widening the spread between the two. France’s debt reached 119% of GDP and is projected to rise to 122%, with plans to borrow a record 340 billion euros in 2027.
Analysts at Maybank noted signs of contagion, with yields in Greece and Italy also surging. The turbulence has led markets to reduce expectations for European Central Bank rate hikes. Lee Sue Ann of UOB’s Global Economics & Markets Research said the ECB is likely to pause in October and deliver one final 25-bps hike in December, as tighter financial conditions reduce urgency despite above-target inflation.
The euro touched $1.1160, its lowest since May 2025.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing