The euro hit a 17-month low against the dollar on Monday as concerns over the political direction of the euro zone’s two largest economies spilled over into broader markets.
The euro area currency recently fell by 0.6% against the dollar, its lowest since May 19, 2025, according to LSEG data.
This comes as the eurozone faces simultaneous increases in inflation, interest rates and government borrowing costs.
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Rufaro Ciricelli, head of fixed income at RBC Wealth Management, told CNBC’s “Squawk Box Europe” on Monday that Spanish assets were among his investment priorities this year because of the country’s growth trajectory and relative financial stability.
“What’s really important is the strength of the commitment to maintain some of these fiscal rules. And even when we saw the (bond market) decline last week, we were looking at Spanish government bonds, Portuguese government bonds, and they weren’t sold as aggressively as we saw in France and Italy,” Ciricelli said.
“So in a sense investors are finding it an attractive market.”
France’s financial crisis in focus
France, meanwhile, remains the “masterpiece” of Europe’s sovereign market problems, as the cost of servicing its mounting debt mountain increases.
Economists at Barclays said on Friday that the French government outlined a proposed 2027 budget that aims to cut the public deficit to 5% of gross domestic product next year from 5.4%, but it is unlikely to meet the fiscal target even if the plan is adopted in the coming months.
“French fiscal and political developments cloud the outlook for the eurozone, with fiscal fundamentals remaining weak and unlikely to reach an inflection point before next year’s presidential election.”
However, ING strategists said that even if the budget were passed in full, “France’s structural fiscal problems will not be resolved.”
“While the deficit is too high to stabilize debt ratios, aging-related spending and interest payments will continue to rise, forcing the next administration to make even more difficult choices,” they said.
“So far, none of the major presidential candidates has presented a sufficiently detailed plan that explains which spending will be cut, which taxes will be changed, and how the debt ratio will ultimately be stabilized.”
