Euro drops amid high energy prices and street riots in France
Against the yen, the US dollar is up 0.12% at 158.20
The euro experienced a significant drop on Monday, October 19, as concerns over political instability in France, compounded by high energy prices, weighed on the currency. French Prime Minister Sebastien Lecornu announced partial curfews in some local municipalities following weekend riots and looting, marking some of the worst unrest in France in years.
Analysts noted that the euro's reaction in early October was more severe and followed a well-known pattern: the single currency typically faces sustained pressure only if French political tensions exceed national boundaries and negatively impact sentiment across the eurozone. The euro fell 0.2% to US$1.1218, more than 1% at month-end after a significant widening in the spread between French government bonds and safe-haven German bonds, raising risk premiums for other countries within the bloc.
This shift came after investors reassessed their outlooks, considering robust US economic growth and equity market gains driven by the artificial intelligence boom, which supported the greenback for months. Analysts emphasized that rather than the oil price itself, the key factor influencing the euro/dollar exchange rate was how the Federal Reserve and the European Central Bank would respond to it.
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