Euro falls to 17-month low

The euro fell to below $1.12 against the dollar on Monday, before recovering slightly. This is the lowest level the euro has reached against the dollar since May 2023.

The single currency fell as much as 0.8% against the dollar in early trading on Monday. It has slumped by about 1.2% this month, accelerating a drop of about eight cents against the greenback from a peak of $1.20 in January.

Investors said the sell-off in the euro was fuelled by concerns over France's rising debt costs as the government battles to control its stretched public finances in the run-up to next year's presidential election.

French prime minister Sébastien Lecornu is hoping to cut €54bn of public spending in his budget as he battles to bring down the deficit in Europe's second largest economy.

The yield on French 10-year government bonds last week hit the highest level since 2002, before dipping back on Friday. This pushed the gap between France and Germany's borrowing costs to its widest level since 2012.

The announcement of a snap election in Spain by the socialist prime minister, Pedro Sánchez, has also fuelled eurozone uncertainty. Madrid's benchmark Ibex 35 index rose by 0.5% on Monday.

Kathleen Brooks, the research director at XTB, said Europe is taking the spotlight at the start of the week, as fiscal and political concerns hit the bloc. France is the epicentre of the concerns, Brooks said.