The euro fell to a 17‑month low against the dollar, slipping 0.8% early on Monday.

The decline followed reports that France’s debt could threaten eurozone stability and the announcement of a snap election in Spain.

The currency dropped to $1.0655 from $1.072 earlier in the day, rattling European equities: the CAC‑40 slid 1.3% and the Spanish IBEX 35 fell 2.1%.

Investors are re‑evaluating the euro's resilience, according to market observers.

The move comes amid long‑standing concerns about France’s debt burden, which sits at 98% of GDP, close to the EU’s 90% threshold. France’s fiscal policy has been under scrutiny since the 2022 debt crisis, and the European Central Bank has warned that rising debt could undermine the single currency.

The snap election in Spain, announced after the government’s defeat in a vote of confidence, added further uncertainty. Analysts say the election could shift Spain’s fiscal stance, potentially tightening or loosening borrowing.

European bond markets have tightened, with 10‑year French OAT yields climbing 2.5 basis points to 1.75% and Spanish 10‑year yields up 3 basis points to 1.20%. The ECB’s next policy meeting is scheduled for mid‑October, where it will review interest rates and forward guidance.

The euro’s dip also affected commodities: gold rose to $2,150 per ounce, while oil fell 1.2% to $78 a barrel. In the United States, the dollar index gained 0.5% in early trading.

Market participants are watching the ECB closely; the bank has repeatedly affirmed its commitment to maintaining a stable eurozone. No official statement was issued in response to the drop, but traders expect the ECB to reassess its stance if the euro continues to weaken.

For businesses, the weaker euro could make European exports cheaper and imports more expensive, potentially shifting trade balances. Companies with euro‑denominated debt may face higher repayment costs in pounds or dollars.

The euro's recovery will depend on the outcome of Spain’s election and France’s fiscal policy moves. If the French government announces measures to curb debt, the currency could stabilise, but a prolonged election campaign could prolong volatility.

The European markets are also watching the next G7 finance ministers’ meeting, where debt‑management frameworks will be discussed. The outcome could influence investor confidence across the bloc.