The single currency fell as much as 0.8% in early trading to below $1.12, its lowest since May 2025, before recovering slightly. It has declined about 1.2% this month, accelerating a drop of roughly eight cents from a peak of $1.20 in January.
France’s Cac 40 index fell 1% on Monday, while the FTSE 100 rose 0.2% and Germany’s Dax was little changed. Investors pointed to France’s fiscal position as the main driver of the sell-off. The yield on French 10-year government bonds hit its highest level since 2002 last week before dipping on Friday, widening the gap between French and German borrowing costs to its widest since the 2012 eurozone sovereign debt crisis.
The minority government of Prime Minister Sébastien Lecornu has announced plans for €54bn in savings to curb the budget deficit, involving cuts to pensions and government department funding, excluding defence. The measures face political resistance amid strikes and protests, with President Emmanuel Macron’s centrist administration under pressure ahead of the presidential election, where the far-right National Rally party is gaining ground.
Adding to uncertainty, Spanish Prime Minister Pedro Sánchez called a snap election after rightwing parties blocked emergency housing legislation. “Europe is taking the spotlight at the start of the week, as fiscal and political concerns hit the bloc,” said Kathleen Brooks, research director at XTB. “France is the epicentre of the concerns; however, Spain is also set to get ready for an early election, which is adding to investor worries.”
The sell-off in European sovereign debt comes amid a global bond rout triggered by the ongoing war in Iran.