Euro Slides Toward 1.116 as French Fiscal Worries and Energy Risks Resurface

EUR/USD dropped back toward 1.5-year lows near 1.116 on Wednesday as a brief relief rally in French sovereign bonds faded and energy prices climbed. The common currency had tumbled to a 17-month low of 1.1160 on October 5 amid French political gridlock and Spain's snap election announcement, which widened the French-German 10-year yield spread to 150 basis points. While French deficit reduction plans offered brief support on Tuesday, spreads widened again by 13 basis points on Wednesday. Meanwhile, Brent crude touched $102 per barrel and the 10-year U.S. Treasury yield hit 5.365%, reinforcing broad dollar strength.