Europe’s Money Problem Just Hit the Euro Where It Hurts
AT A GLANCE
- Euro slid to $1.1219, its lowest since May 2025
- Down 1.2% last week, and over 1% against the pound
- Dollar index at 102.17 after an 18-month high
- One bank sees the euro dropping below $1.10
Debt worries in France and a snap election in Spain are pushing the euro down while the dollar keeps climbing.
The euro stayed near a 17-month low on Tuesday. Political uncertainty and fiscal concerns across the euro zone are dragging it down, while the dollar rides higher US Treasury yields.
KEY DETAILS
The euro inched down to $1.1219 in Asia after hitting its weakest level since May 2025 in the previous session. It was last at 84.87 pence, having also lost more than 1% against the British pound last week.
The pressure comes from high debt and political gridlock in France, plus an upcoming snap election in Spain. Surging French borrowing costs are spreading across the wider euro area, and policymakers are watching closely.
Joseph Capurso of Commonwealth Bank of Australia is pessimistic. He expects the euro to fall under $1.10 and sees little chance of budget deficits being tackled soon.
MARKET REACTION
Sterling slipped 0.06% to $1.3216. The dollar rose 0.18% to 158.16 yen. The Australian dollar held at $0.6971, and the New Zealand dollar eased 0.05% to $0.5597.
WHY IT MATTERS
Weaker-than-expected US jobs data cut bets on a Fed hike this month, yet the dollar still gained. Investors expect more tightening later. Barclays says cost pressures keep doubts alive about sustaining 2% inflation, and US services data shows prices paid by businesses rising.
Watch the Spain election, French borrowing costs, and US yields. The Bank of Japan may also signal this month that inflation has hit its 2% target.
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Source: Reuters
