Euro falls to $1.1161, hit by French debt crisis

Bad wake-up call for the single currency. The euro slipped on Monday October 5 to $1.1161 during the Asian session. It thus returns to its level of May 2025, after four weeks of decline in a row. The mistrust first hit Paris' debt. Its insurance against default jumped 40% in one week. Doubt is now gaining ground in the currency that France shares with its neighbors. The rest therefore concerns anyone who holds euros, bitcoin or both.

The euro at 1.116 dollars, France in the sights of currency traders

Singapore, Monday morning. Asian trading floors opened the week selling the euro against just about everything. The currency lost 0.68% against the dollar at 1.1176, reports Reuters. It also lost 0.5% against the Swiss franc and 0.39% against the pound sterling. But when one currency declines against three others the same morning, the problem is at home.

The culprit is called the “spread”. This is the premium that Paris pays in addition to Berlin to borrow for ten years. It ended last week at 140 basis points, or 1.4 percentage points. Friday during the session, however, it had exceeded 150 points, unheard of since the end of 2011. The jump reached 34 points in five sessions. Moreover, LSEG had not recorded such a strong weekly increase for 17 years. Monday morning, it was already back between 145 and 148 points on TradingView. At the same time, French debt futures were still close to their historic lows. Those on the German Bund were rising, because money remains in the euro zone but moves from Paris to Berlin.

Chris Weston leads research for broker Pepperstone. His advice to rebound bettors is therefore in seven words: “Don’t put yourself in front of the train. »

The ECB has an anti-crisis shield, the French debt is not automatically entitled to it

Do you think that Frankfurt will end up buying the French debt, like in 2012? The tool exists. Since July 2022, the European Central Bank has had the Transmission Protection Instrument (TPI). It authorizes it to buy the bonds of an attacked country on the markets without a ceiling set in advance.

The instructions for use are contained in the press release published by the ECB on July 21, 2022 and pose four conditions. The first concerns European budgetary rules. A country undergoing excessive deficit procedure must therefore prove that it is applying the measures requested by the Council. However, France has been in this procedure since July 2024. Its deficit will reach 5.4% of GDP this year for a debt of 119%. Above all, the tool is reserved for panics that the country's accounts do not justify.

The political calendar doesn't help. The government is in fact defending a stated effort of 54 billion euros for 2027 before an Assembly without a majority. However, the April presidential election arrives in six months. Brent Donnelly chairs the analytics firm Spectra Markets. According to him, these budgetary promises are not very credible since power will soon change hands.

Not everyone is shouting about the euro crisis, however. Ninghui Liu, strategist at State Street Investment Management, speaks more of a French story. He also recalls that the market has only reacted for a week. If tension increased, Germany would intervene, according to him, to preserve the Union.

The dollar wins, Bitcoin does not benefit from the fall of the euro

The winner of the day is the dollar. Its index against six major currencies climbs 0.47% to 102.37. The US ten-year rate supports it at 5.26%. It still touched a 24-year high last week. However, employment on Friday disappointed with 29,000 job creations in September compared to 90,000 expected. The market therefore gives a 78% chance of the Fed status quo at the end of October. This probability was 36% a week earlier. Traders are still waiting for a rate hike in December.

Bitcoin has not played the safe haven. It was trading around $85,800 around 10 a.m. Monday. Its September peak remains at $87,354. It remains about 32% below its October 2025 record.

Instead, look at the price of bitcoin converted into euros. At 1.1176 dollars to the euro, one BTC costs around 76,800 euros. Thus, each cent lost by the euro against the greenback adds nearly 700 euros to the French bill. And this without the dollar rate moving one iota.