Breaking: Euro plummets to May 2025 low vs bullish USD amid France's debt crisis
- EUR/USD attracts heavy selling on Monday and is pressured by a combination of factors.
- Concerns about France’s spiraling debt crisis and political gridlock weigh on the Euro.
- Geopolitical uncertainties counter receding October Fed hike bets and boost the USD.
The EUR/USD pair comes under intense selling at the start of a new week, breaking below the 1.1200 mark and hitting its lowest level since May 2025 during the Asian session. Spot prices currently trade just above 1.1150, down around 0.85% for the day, and seem vulnerable to decline further amid a combination of negative factors.
The shared currency is weighed down by concerns about France’s deepening debt levels and political gridlock ahead of next year’s election, which, along with a strong pickup in the US Dollar (USD) demand, exerts heavy downward pressure on the EUR/USD pair. French borrowing costs have risen alongside global yields, with the benchmark 10-year government bond yield rising above 4.9% and close to its highest level in decades.
Furthermore, France’s debt-to-GDP ratio is expected to climb to 122% next year from 119% this year. Moreover, far-right leader Marine Le Pen, who is leading in the polls for the presidential race, has proposed tax cuts and vowed to bring down France’s retirement age to as low as 60, despite the already generous pension system eating up an ever bigger slice of the budget. This adds to market worries and continues to undermine the Euro.
The USD, on the other hand, catches aggressive bids and rallies to a fresh high since April 2025 as persistent geopolitical uncertainties counter Friday's disappointing US Nonfarm Payrolls (NFP) report, which further tempered October Federal Reserve (Fed) rate hike bets. This is seen as another factor that contributes to the bearish tone surrounding the EUR/USD pair and suggests that the path of least resistance for spot prices is to the downside.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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