UBS CEO warns ‘hard measures’ are needed to tackle French debt crisis, as turmoil worsens

The euro experienced a significant rebound on Tuesday, reaching its strongest daily gain in a month as French bond yields fell, alleviating concerns about the stability of the eurozone debt markets. The currency climbed 0.28 percent, trading at $1.1252, marking its biggest gain since September 3. Previously, the euro had fallen to its lowest level in 17 months at $1.116, following a decline of over 1 percent in the previous week, marking its fourth consecutive weekly drop.

Meanwhile, the dollar index, which gauges the greenback against a basket of currencies, declined 0.26 percent to 101.89, on track for its largest single-day drop since September 25.

Eurozone governments have been grappling with mounting debt pressures, as politicians strive to reduce budget deficits ahead of a highly contentious election in 2027. France's escalating debt concerns have intensified in recent days, as the country prepares to hold a snap election. The prospect of a far-right presidential candidate, Marine Le Pen, winning power has further heightened worries about potential spending cuts, with Le Pen proposing to slash €140 billion ($158 billion) in expenditures if elected, compared to her initial €125 billion proposal.

Meanwhile, a drop in energy prices has provided some relief to French bond markets. French 10-year yields fell by 8 basis points to 4.7824 percent, with crude prices falling due to increased Middle Eastern crude exports and a G7 emergency stockpile release. This easing of supply concerns has helped drag yields down, contributing to the euro's recovery.

In Italy, where spreads had widened recently, the bond market improvement has helped support the euro. The recent drop in the dollar also bolstered other currencies, with the British pound rising 0.39 percent to $1.327, marking its highest level in a week. However, the Japanese yen remained the exception, with the dollar up 0.05 percent against the Japanese currency.