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The euro is trading close to the 17-month low hit yesterday, when the single currency fell by over 0.75% to as low as €1.1214.
Ipek Ozkardeskaya, senior analyst at Swissquote, says jitters about France are hurting the euro:
The sharp weakening of appetite for French debt is a big issue for the broader euro area and the euro itself. France is the euro area’s second-largest economy — we used to call it the ‘core’, along with Germany, back during the 2012 sovereign debt crisis!
So, if concerns spread, other heavily indebted members could also face higher borrowing costs, tightening financial conditions across the region. For the euro, that means weaker growth prospects and a growing risk premium. The EURUSD tanked to 1.1215 yesterday, as the market’s focus shifted from the central-bank convergence/divergence story towards the euro area sovereign debt story.
France’s fiscal package would prevent the deficit from reaching 6.5% of GDP next year, but it would not stabilise public debt. With a difficult political process ahead, French bonds are likely to remain under pressure, while the threshold for ECB intervention remains high
