The euro weakened against the US dollar on Monday, October 19, 2026, as political unrest in France heightened concerns about the country’s worsening fiscal outlook. Meanwhile, the US currency gained support from a recovery in artificial intelligence (AI)-related stocks following the previous week’s sharp selloff.
Currency markets also reacted to economic data from China and Canada, alongside comments from central bank officials about inflation and interest rates. The Australian dollar advanced after China’s economic growth improved, while the Canadian dollar remained supported by expectations of persistent inflation. The Japanese yen declined against the greenback despite indications that further interest rate increases could be considered.
The euro fell 0.24% to $1.1212 as France confronted the aftermath of weekend riots and looting associated with nationwide anti-government protests. On Monday, the French central government urged some local authorities to introduce curfews amid criticism over security failures.
The unrest has intensified concerns about France’s political stability and deteriorating public finances. Investors are also monitoring the potential impact on next year’s presidential election, particularly the prospects of Marine Le Pen, leader of the National Rally party. Her possible victory could raise fresh questions about France’s future relationship with the European Union.
Marc Chandler, chief market strategist at Bannockburn Global Forex, highlighted the contrast between Le Pen’s economic and European policies, noting that she advocates fiscal austerity while maintaining an anti-EU position.
Political uncertainty has also affected France’s government bond market. The spread between French government bonds, known as OATs, and Germany’s benchmark Bunds widened to 147 basis points, compared with approximately 110 basis points in late September. The spread has reached levels last recorded during the European debt crisis of 2011–2012, reflecting increased investor concern about French debt relative to German government securities.
The US dollar index, which tracks the greenback against a basket of major currencies, including the euro and yen, rose 0.17% to 101.97.
The dollar’s advance followed a recovery in AI-related stocks. Last week’s technology share selloff had weakened the currency as investors worried that declining enthusiasm for AI investments could reduce capital inflows into the United States and lower demand for the dollar.
Francesco Pesole, an FX strategist at ING, said investors appeared to believe that stock market turbulence could influence expectations for Federal Reserve policy, potentially reducing the likelihood of further monetary tightening even as inflation remains elevated.
Pesole also noted that stock market performance can affect household wealth and economic resilience. If instability originates in technology and AI shares, the dollar could underperform other Group of 10 currencies rather than automatically benefiting from its traditional safe-haven appeal.
Recent comments from Federal Reserve officials have suggested that policymakers are not rushing to increase interest rates again. Fed Chair Kevin Warsh expressed optimism about the US economy on Friday but offered no indication of whether further increases would be necessary.
Interest rate futures showed that traders expected the Federal Reserve to keep rates unchanged at its October 27–28 meeting. However, markets were pricing in a 91% probability of a rate increase in December.
The Australian dollar rose 0.49% against the US currency after China reported annual economic growth of 4.5% in the third quarter, recovering from a three-year low. The improvement supported the Australian currency, which is sensitive to economic conditions in China.
The Canadian dollar surrendered some of its earlier gains after data showed that Canada’s annual inflation rate increased to 3.1% in September, slightly below economists’ expectations.
However, comments from Bank of Canada Governor Tiff Macklem helped support the currency. Speaking on Saturday, Macklem said the central bank expected to raise its quarterly inflation forecast significantly this month because crude oil and petroleum product prices remained persistently high.
The Canadian dollar was last up 0.27%, trading at C$1.41 per US dollar.
Separately, Alberta, Canada’s oil-rich western province, was scheduled to hold a nonbinding referendum on Monday on whether it should secede from the country.
The Japanese yen weakened 0.35% against the dollar to 158.49 yen per dollar. Bank of Japan Governor Kazuo Ueda said underlying inflation was approaching the central bank’s 2% target. He also pointed to strong global demand for AI as an additional source of inflationary pressure, alongside Japan’s tight labour market, suggesting that further interest rate increases could remain possible.
Overall, currency movements reflected growing political concerns in France, changing investor sentiment toward technology stocks and uncertainty over future monetary policy. While French instability weighed on the euro, the US dollar benefited from the stock market rebound. Economic developments in China, Canada and Japan continued to influence their currencies as investors assessed the outlook for global growth, inflation and interest rates.
