The euro saw a sharp decline on Monday as rising political tensions in France put pressure on European markets. The single currency weakened by 0.6% against the U.S. dollar, trading at $1.0513, amid fears that France’s political crisis could destabilize the region. The far-right National Rally (RN) party in France has given Prime Minister Michel Barnier until Monday to meet its demands regarding his proposed budget, or face a potential no-confidence vote that could collapse his government.
The uncertainty surrounding France’s political landscape led to a notable drop in French stocks, with the Paris CAC 40 index falling by 1%. However, French government bonds saw limited impact, though their yields lagged behind other European debt markets. The premium on French bonds—compared to the more stable German bonds—rose above 80 basis points, marking the highest spread since the 2012 eurozone debt crisis.
Despite the pressure on the euro, global stock markets showed resilience. The S&P 500 and Dow Jones Industrial Average both reached record highs, buoyed by strong performances in the tech sector. This uplift helped the MSCI All-World index rise by 0.1%, indicating positive sentiment across most global markets.
The U.S. dollar also gained strength, bolstered by comments from President-elect Donald Trump, who warned emerging BRICS nations against trying to challenge the dollar’s dominance. The dollar index rose by 0.25%, reaching 106.31, after gaining 1.8% in November. The outlook for U.S. interest rates remains in sharp focus, with traders betting on a 66% chance that the Federal Reserve will cut rates by a quarter-point in December, following Friday’s key payrolls report.
In Asia, Chinese stocks received a boost from a strong manufacturing survey, with the Hang Seng index rising 0.16% and mainland Chinese blue chips gaining 0.6%. However, the yen weakened by 0.2%, hovering near its six-week low against the dollar.
Meanwhile, cryptocurrency markets saw volatility, with ether reaching a near six-month high before retreating. Bitcoin also slipped, down 2.7%, while gold prices dropped 0.7%, pressured by the stronger dollar. Oil prices rose as geopolitical tensions flared in the Middle East, following renewed attacks by Israel on Lebanon, which raised concerns about potential supply disruptions. Brent crude futures were up 0.8% at $72.42 per barrel, and U.S. crude rose 0.78% to $68.54 per barrel.
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