EUR/USD weakens below 1.0750 as Eurozone political uncertainty poses downside risks for Euro

The EUR/USD pair weakens near 1.0730, snapping the three-day winning streak during the early European session on Thursday. However, the upside for the pair seems limited as investors are worried about the political uncertainty in the Eurozone. Investors will closely watch the preliminary Eurozone and US Purchasing Managers Index (PMI) for June, which are due on Friday. 

The cautious mood by the calling of a snap election in France after a defeat by the far-right National Rally raised fear of Eurozone political uncertainty and weighed on the Euro (EUR). Furthermore, the divergence in monetary policy between the Eurozone and the US might further drag the shared currency lower. On Wednesday, the European Central Bank (ECB) Governing Council member Mario Centeno said that the central bank can ease monetary policy further so long as inflation continues to moderate. 

Across the pond, the weaker US Retail Sales report suggested signs of subdued activity among US consumers, fueling the case for US Federal Reserve (Fed) rate cuts later this year, which is likely to weaken the Greenback in the near term. However, the hawkish tone from several Fed officials might cap the Greenback’s downside. Boston Fed President Susan Collins warned on Tuesday that it is still too early to say whether or not inflation is on course towards the Fed’s 2% target. Meanwhile, Richmond Fed President Thomas Barkin said that he needs to wait for several more months of economic data before considering cutting the interest rate.