S&P Global Ratings has downgraded France’s credit rating to A+ from AA-, citing growing fiscal uncertainty despite the government’s 2025 draft budget. This marks the second downgrade in a month, following similar moves by Fitch and DBRS.

The downgrade highlights deepening concerns over France’s rising debt, persistent deficits, and political instability. Prime Minister Sebastien Lecornu’s government narrowly survived recent no-confidence votes, raising questions about its ability to push through key fiscal reforms.

Market Reaction:
EUR/USD held steady near 1.1650, showing limited short-term impact. However, the downgrade could create longer-term pressure on the euro, especially if Moody’s follows with another cut later this month.

Fiscal Outlook:

• Debt-to-GDP expected to rise from 113% to 121% by 2027.

• Deficit projected at 5.5% of GDP in 2025, nearly double the eurozone median.

• Bond spreads between French and German 10-year yields have widened above 60 basis points — the highest since the Eurozone debt crisis.

Market Implications:
The downgrade reinforces structural headwinds for the euro, with investors demanding higher yields on French bonds. It also complicates the ECB’s policy outlook, as weak growth limits options for further tightening.

At CrescentQuant, our automated trading systems continuously monitor such macro shifts, adapting strategies to account for credit risk, political volatility, and currency correlations.

Key Takeaways:

• France loses its AA- rating at two major agencies.

• Fiscal and political instability continue to weigh on investor confidence.

• EUR/USD remains stable but faces growing long-term risks.

• Traders should watch upcoming French budget votes and Moody’s review on October 24.