The euro rebounded slightly but could continue to see downside risks.
Stronger-than-expected US PMI data from Friday has supported the US Dollar, presenting additional challenges for the euro-dollar pair. Concerns about French elections could also weigh on the currency.
A National Rally win could be detrimental to the European currency.
On the fixed-income front, German government bond yields have fallen due to weak eurozone economic data. Meanwhile, the yield gap between French and German bonds has widened to 75 basis points, highlighting market participants’ caution amidst French political uncertainty.
High US interest rates could continue to support the dollar against the euro while the Federal Reserve is expected to begin cutting rates until September.
Market participants are likely to await this week’s release of the US Personal Consumption Expenditures (PCE) Price Index data on Friday, which will play a crucial role in shaping the near-term USD price dynamics and potentially influencing the Fed’s decisions on rate cuts.
