The euro dropped against the U.S. dollar on Monday after France’s newly appointed Prime Minister, Sébastien Lecornu, unexpectedly stepped down, deepening political uncertainty in the eurozone’s second-largest economy.
By 05:38 ET (09:38 GMT), the euro was down around 0.7% at $1.1664, while French stocks fell sharply as investors digested the news.
Lecornu, a trusted ally of President Emmanuel Macron, had been in office for less than a month. His resignation followed mounting criticism from both within his own party and the opposition over his newly announced cabinet lineup.
Despite weeks of internal discussions, the final list of ministers proved divisive. Some lawmakers accused Lecornu of assembling a team that was too right-leaning, while others said it failed to reflect a strong political direction, raising doubts about the government’s ability to govern effectively in a deeply fractured parliament where no party holds a majority.
According to a statement cited by Reuters, the Elysée Palace said Lecornu had tendered “the resignation of his Government to the President of the Republic, who has accepted it.”
Lecornu’s exit adds to a growing sense of instability surrounding Macron’s leadership. Since the president’s decision to call an early parliamentary election in 2024, France’s political landscape has become even more fragmented, leaving the government in a fragile position. Lecornu was the fifth prime minister to serve under Macron in two years, highlighting the challenges of maintaining a steady administration.
Yen Weakens Sharply as Takaichi’s Victory Signals Continuation of Easy Policy
Across Asia, currency markets were largely subdued as traders remained cautious amid the U.S. government shutdown, but the Japanese yen suffered its biggest drop against the dollar in five months after Sanae Takaichi won the leadership race for Japan’s Liberal Democratic Party (LDP) — a result seen as reinforcing the country’s long-standing policy of monetary easing.
Takaichi, known for her conservative stance and firm backing of “Abenomics”, secured victory in the LDP runoff election on Saturday with 54.25% of the vote.
She is expected to be formally approved as prime minister in mid-October, barring major opposition challenges, making her Japan’s first female leader.
Her win is viewed as a signal that Japan will pursue higher government spending and maintain a dovish policy stance, easing pressure on the Bank of Japan to tighten monetary policy in the near term.
Following the news, the USD/JPY pair rose 2.0% to 150.45, marking a significant decline for the yen.
Japanese government bonds also fell, with long-term yields climbing sharply, as investors anticipated increased debt issuance to fund new fiscal stimulus efforts.
Meanwhile, the U.S. Dollar Index—which measures the dollar’s performance against a basket of major currencies—gained 0.7% to 98.41.
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