The euro just dropped to a 17-month low, and the pressure is coming from France. Investors are demanding a bigger premium to hold French government debt as budget worries and political gridlock intensify ahead of next year's election.

On Friday, the gap between French and German 10-year bond yields jumped above 150 basis points, its highest since the euro-area debt crisis in 2011. Now the stress is hitting currencies: the euro fell below $1.12 in Asian trading, while the dollar climbed near its strongest level since April of last year.

The number to watch from here is that French-German yield gap. If it keeps widening, Europe's debt worries may not stay contained.

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