The euro has slid to $1.116, its weakest level since May last year, marking a fourth consecutive weekly decline as investors fret over France’s public finances. A sell-off in French government bonds, a heavy sovereign‑debt burden, and political uncertainty ahead of the 2027 election have been key drivers of the euro’s weakness. Markets doubt Paris can quickly close the budget gap without harming economic growth.

Stress in the sovereign bond market is prompting capital to flee European assets. Rising borrowing costs have spread across the region, depressing government bond prices, while inflation risks tied to high oil prices compound the problem. French bonds have taken the brunt of the selling: parliamentary disputes are stalling tough fiscal plans and delaying measures to rein in public spending.

A strong dollar is adding further pressure. Ten‑year US yields top 5.2%, drawing capital and supporting dollar demand. The US dollar index has climbed to 102.3, squeezing the British pound and the yen. Although softer US jobs prints have trimmed market odds of a Fed rate hike in October, traders still expect further monetary policy tightening before year‑end.