The Euro is facing downward pressure and may weaken further in the coming days due to worries over France’s bond markets amid the ongoing political turmoil.

France is struggling with political instability; Prime Minister Michel Barnier resigned in December 2024, François Bayroux stepped down in September, and Sébastien Lecornu resigned on Monday.

Markets showed little reaction to Bayroux’s resignation, but the fact that his successor lasted only a month sent a shock through investors, highlighting the current French political landscape’s inability to resolve the country’s financial challenges, Pound Sterling Live reports.

Sébastien Lecornu stepped down after just 27 days in office, undermining progress on the national budget and raising the likelihood that President Macron may have to call new legislative elections to break the deadlock, potentially paving the way for a Rassemblement National-led government.

Unsurprisingly, these developments have heightened fiscal concerns, driving domestic bond yields higher once again.

Worries over France’s debt path were reflected in a selloff of government bonds, causing French bond yields to spike on Monday.

Lecornu’s resignation underscores that French government bonds continue to be seen as too risky for investors.

Without a parliamentary majority, France will struggle to address its debt and fiscal challenges. The issue is that resolving it will likely require a severe crisis in the OAT bond market to force French politicians into action.

As French bonds decline in value, their yields climb, prompting analysts to track their pace relative to other markets to gauge the risk premium investors are assigning to French assets.

On Monday, the spread between French and German bond yields widened significantly, signalling growing investor worries about France’s economic outlook.

These worries are spilling over into currency markets, causing the euro to weaken.

The latest government turmoil in France has pushed risk spreads wider, while the Euro has also come under pressure.

The Pound strengthened against the Euro, reaching a peak of 1.1523, which translates to a Euro-to-Pound rate of 0.8678. The Euro has since recovered some ground, suggesting a potential stabilisation on Tuesday.

Nonetheless, the Euro may face challenges in making a full recovery due to ongoing risks.