EUR/USD consolidates around 1.0700, just above one-and-a-half-month low touched on Friday

■  EUR/USD struggles to build on Friday’s bounce from its lowest level since early May.

■  Political uncertainty in Europe continues to undermine the Euro and cap the upside.

■  The Fed’s hawkish outlook acts as a tailwind for the USD and favors bearish traders. 

The EUR/USD pair kicks off the new week on a subdued note and consolidates its recent heavy losses to the lowest level since early May, around the 1.0670-1.0665 region touched on Friday. Spot prices currently trade around the 1.0700 mark and seem vulnerable to extending the recent downward trajectory witnessed over the past two weeks or so.

The shared currency continues to be undermined by concerns that a snap election in France will worsen the fiscal situation in the Eurozone's second-largest economy, against the backdrop of a lead to the right-wing National Front party in the opinion polls. In fact, French Finance Minister Bruno Le Maire said on Friday that the country was at risk of a financial crisis if either the far right or left won because of their heavy spending plans. This, along with a modest US Dollar (USD) uptick, validates the near-term negative outlook for the EUR/USD pair. 

The Federal Reserve's (Fed) hawkish surprise at the end of the June policy meeting, indicating a median projection of just one rate cut in 2024, remains supportive of elevated US Treasury bond yields. Apart from this, persistent geopolitical tensions in the Middle East turn out to be another factor underpinning the safe-haven Greenback, suggesting that the path of least resistance for the EUR/USD pair is to the downside. That said, signs of easing inflationary pressures in the US keep the door open for the first interest rate cut by the Fed in September. 

The bets were further reinforced by the US data released on Friday, which showed that import prices unexpectedly fell in May and further boosted the domestic inflation outlook. Furthermore, a survey by the University of Michigan revealed that US consumer sentiment deteriorated sharply in June, which, in turn, might hold back the USD bulls from placing aggressive bets and help limit losses for the EUR/USD pair. There isn't any relevant economic data due for release from the US on Monday, leaving spot prices at the mercy of the USD.