The euro has fallen to its weakest level against the British pound since June of last year, weighed down by France's deepening fiscal crisis and fresh political risks emerging across Europe.

The euro at one point dropped 0.4% to 0.8449 pounds per euro, breaking below the 2026 low touched in July. Earlier this week, the euro had already slid to a 17-month low against the US dollar, and on Wednesday it also underperformed most G-10 currencies.

France is grappling with a worsening bond market crisis. Investor sentiment has continued to deteriorate amid missed fiscal deficit targets, policy gridlock, and the possibility that next year's presidential election could fundamentally reshape the country's policy direction.

French far-right presidential candidate Marine Le Pen called on the European Central Bank on Tuesday to step in and bring down soaring government debt financing costs.

The turmoil has already spread to European government bond markets. Last week saw a heavy sell-off in European bonds, reviving memories of the eurozone debt crisis.

Meanwhile, Spanish Prime Minister Pedro Sanchez's announcement of an early general election has added another layer of political risk to European markets.

"European political concerns will continue to pose downside risks for the euro," Samara Hammoud, a currency strategist at Commonwealth Bank of Australia, wrote in a research note.

At the same time, traders are beginning to scale back their bets on further European Central Bank rate hikes. The swaps market now leans toward pricing in three quarter-point increases by September 2027, compared with four at the start of last week.