France’s deficit plans came under fresh market scrutiny on Oct. 19, when a Reuters snapshot showed its bond yields rising faster than Germany’s as the euro declined.
Reuters put the euro at $1.1203, down 0.3%. The yield on France’s 10-year government bonds gained 7.3 basis points to 4.857%, compared with a 1.6-basis-point increase to 3.425% for comparable German bonds. All were intraday readings. An earlier European trading report placed the euro near $1.1230.
French Prime Minister Sébastien Lecornu said he had instructed prefects to arrange partial, localized curfews for the evening of Oct. 19. He outlined help for businesses damaged by looting, saying public money would be needed while arguing that those responsible for the damage should bear the cost.
France’s draft budget projects a deficit equal to 5.4% of gross domestic product in 2026 and aims to reduce it to 5.0% in 2027. Higher yields raise the cost of new government borrowing, and the budget presentation links interest expenses to its deficit-reduction effort. Aid for damaged businesses would create a further call on public funds.
Reuters also put Brent crude futures at $104 a barrel, down 1.8% in the same market report. Despite that decline, the price remained a concern for policymakers: Citing inflation pressure from the Middle East conflict, the ECB increased its deposit rate to 2.50% in a 25-basis-point move that took effect Sept. 16. The Federal Reserve raised its target range by 25 basis points to 3.75%–4.00% on Sept. 16.
Reuters quoted Commerzbank head of foreign exchange and commodity research Thu Lan Nguyen as saying the euro-dollar rate hinged on how the two central banks responded to oil prices. Reuters reported a steeper euro decline during an earlier October widening of the gap between French and German bond yields. The Fed’s next scheduled decision is Oct. 28, followed by the ECB’s on Oct. 29.
