Euro Nears Recent Highs Ahead of Confidence Vote and ECB Meeting

The euro traded above $1.17, holding near its strongest level since late July, supported by broad dollar weakness and cautious positioning ahead of a busy week. In France, Prime Minister Francois Bayrou faces a confidence vote on Monday, which he is widely expected to lose—potentially forcing President Emmanuel Macron to appoint a fifth prime minister in less than two years. Later in the week, the European Central Bank meets on Thursday, with expectations that policymakers will keep rates unchanged for a second consecutive meeting. The ECB is weighing the impact of lingering trade uncertainty and the potential fallout from proposed US tariffs, while inflation has remained on target for a third straight month. Across the Atlantic, investors are focused on this week’s US inflation report after weak labor market data last week reinforced the case for a Fed rate cut in September, with markets now factoring in the possibility of a larger-than-usual move.