The EUR/USD pair continued its decline for a second consecutive session, trading around 1.0720 during Monday's Asian trading hours. The pair was pressured by a stronger U.S. dollar and political uncertainty in Germany.
If Trump's fiscal policies are implemented, they could boost investment, spending, and labor demand, raising inflation risks. This might lead the Fed to adopt more restrictive monetary policies, strengthening the dollar and further pressuring EUR/USD.
Currently trading near 1.07, the pair could decline further if the Fed continues to tighten monetary policy. However, technical indicators hint at a potential mild recovery.
The near-term outlook for EUR/USD depends on signals from the Fed and ECB interest rates. While the ECB maintains its accommodative monetary policy, strong regional data or any Fed policy shifts could support a short-term rebound in EUR/USD, despite ongoing market volatility.