Euro rose in European trade amid attempts to recoup from two-month lows against dollar, and on track for the first profit in five days amid calm trading due to a holiday in European and US markets.
The gains come amid improving risk appetite after US President Joe Biden and top Congressional Republican Kevin McCarthy reached a deal to end the debt ceiling crisis.
Now investors await crucial European inflation data in May, which will provide important clues on the chances of a 0.25% rate hike in June.
EUR/USD rose 0.25% to 1.0743, with a session-low at 1.0715, after losing 0.1%5 on Friday, the fourth loss in a row, plumbing two-month lows at 1.0702 following strong US consumer spending data.
Euro lost 0.8% last week against dollar, the third weekly loss in a row, and the longest such streak of weekly losses this year on concerns about a widening policy gap between the US and Europe.
Risk Appetite
US President Joe Biden and Republican leaders in Congress reached a settlement in the weekend to raise the US debt ceiling, avoiding a catastrophic debt default.
Such a deal boosted market sentiment, but Congress must approve the deal quickly.
European Rates
Even as the European Central Bank asserted its commitment to a monetary policy path, there remains doubts about upcoming rate hikes in Europe with investors divided on the chances of such hikes in June and July.
In order to clinch more clues on the future of European interest rates, investors now await important clues on European inflation in May.
The Dollar
The dollar index fell 0.2% today, the first such decline in six sessions off two-month highs at 104.42 on profit-taking against a basket of major rivals.
Dollar lost its safe haven appeal after the US debt ceiling crisis was seemingly solved this weekend.