The euro dropped to a 17-month low against the dollar on Thursday as France's fiscal crisis pushed its borrowing costs to a 24-year high. Eurozone finance ministers met in Luxembourg to press Paris on its 2027 budget, while a separate global bond selloff eased slightly in the United States.
The euro slid toward 17-month lows against the dollar on Thursday as France's sovereign debt crisis intensified. The French 10-year OAT yield edged up to 4.897% — a spike of nearly 80 basis points since early September — holding near its highest level since July 2002.
France's widening credibility gap
The selloff in French debt has pushed spreads over German Bunds past 140 basis points, dragging Italian BTPs and Greek sovereign debt lower. As a result, Eurozone finance ministers and European Central Bank officials assembled in Luxembourg on Thursday afternoon for monthly policy talks, where the ongoing turmoil in French sovereign debt was set to dominate discussions. Senior Eurozone officials confirmed to Reuters that ministers will urge Paris to pass its 2027 draft budget bill quickly to restore credibility and stem market contagion.
Bank of France Governor Emmanuel Moulin acknowledged the country's fiscal situation was "serious" given a projected 5.4% deficit, but he firmly ruled out ECB intervention, signaling that international investors must bear the burden of Parisian political gridlock.
A global bond rout loses some steam
The French crisis has spilled into a broader global debt selloff, driven by oil-driven inflation concerns, a hawkish tilt from central banks, and jitters over debt issued to fund AI infrastructure buildouts. Yet the U.S. side of that rout eased on Thursday: the 10-year U.S. Treasury yield fell 5.3 basis points to 5.225%, while the 30-year yield slipped 5.4 basis points to 5.607%, after both had earlier risen as much as 8 and 7 basis points respectively.
Still, a closely-watched $22 billion 30-year Treasury bond auction tailed in the afternoon, pointing to weak foreign appetite for long-term U.S. debt. That followed a $39 billion 10-year Treasury note auction on Wednesday that traded through with the highest yield for such an auction since November 2000.
The September FOMC minutes added to the pressure: a majority of Federal Reserve officials indicated another interest rate hike remains on the table before year-end. According to Interactive Brokers senior economist José Torres: "The brutal Treasury sell-off of 2026 could be in its final days."
For now, the euro's fortunes stay tied to Paris rather than Washington.
Source: Investing.com
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