Euro hits 17-month low amid political tensions
The euro fell to its lowest level in 17 months, influenced by growing concerns about France's financial situation and rising debt levels. The spread between 10-year bonds of France and Germany widened to over 150 basis points, reflecting increased borrowing costs for France and the impact of Omicron on the markets. Additionally, expectations for a U.S. interest rate hike decreased after last month's slowdown in job growth, leading to a decline in investor expectations for a rate increase in October to below 20%. As a result, the dollar rose by 0.5% against a basket of currencies, while oil and gold prices declined. Market movements showed a shift: pressures on German bonds eased while pressure on French bonds increased, amid ongoing worries about France's ability to manage its budget deficit and public debt.
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