Euro skids toward fifth weekly fall but selling pressure slows

The euro experienced a fifth consecutive weekly decline against the US dollar, falling to a 17-month low of $1.1161 on Monday, according to Reuters. Market concerns over France's high debt levels contributed to the downward trend. However, the selling pressure appeared to be slowing, as France's debt market stabilized and a drop in US yields dampened the strength of the dollar.

The euro had reached the low of $1.1161 due to worries about France's record-high debt and the challenging political path to budget cuts. Since then, it has rebounded to trade at $1.1211, marking a 0.3% decline for the week and a five-week drop of over 3% against the dollar. The euro against the British pound also declined by 0.3% this week, nearing a 16-month low of 84.74 pence.

Analyst Matt Simpson from StoneX in Brisbane cautioned that the bearish momentum was weakening and recommended caution at these low levels. French presidential candidate Marine Le Pen proposed budget deficit cuts, which markets viewed favorably given the opposition of hard-left rival Jean-Luc Melenchon, who called for the central bank to cancel government debts.

Recent protests in France, led by students, underscored the difficulty leaders face in balancing social spending demands with market concerns. The bond sell-off in France and student unrest formed a feedback loop, as Macquarie strategists Macquarie warned that intensified street riots could lead to higher bond yield spreads. Meanwhile, the US dollar's movements were modest, and gains slowed as US yields reached their biggest weekly drop in about three months.

The yen also saw its fourth consecutive weekly decline, but the recent declines have been minimal, with the yen stabilizing around 158 yen to the dollar. The Australian dollar hovered around $0.6960, while the British pound was at $1.3233. New Zealand's dollar was in its longest losing streak in over four years, nearing a seventh weekly decline due to its low interest rate of 2.75% compared to the Federal Reserve's 3.75% to 4% range. The New Zealand dollar is close to breaking its 2025 low of $0.5485.