On Monday, the euro (EUR) is paring recent gains against the US dollar (USD), trading at 1.1385 at the time of writing after giving up near 1.1430. That leaves the pair near yearly lows, on track to end June with a decline of almost 2.30%, its weakest monthly performance since last July.

Both pairs were not unfazed by an upbeat German retail sales report, which showed a 1.1% escalate in May, following a downwardly revised 0.4% decline in April, and beat expectations for a 0.1% decline. According to data published by Destatis on Tuesday, retail consumption increased by 1.8% in the twelve months to May, after falling by 0.6% in April.

Bets on Fed hikes support the US dollar

On the other hand, the US dollar remains auctioned, supported by market hopes that the US Federal Reserve (Fed) may escalate interest rates as early as September. Recent macroeconomic data has reinvigorated the U.S. exceptionalism narrative amid high inflation pressures stemming from the Iran war, prompting the central bank to adopt a more hawkish stance.

In addition, the US Supreme Court rejected US President Donald Trump’s attempt to fire Fed Governor Lisa Cook, dispelling doubts about the central bank’s independence.

Currency volatility remains confined, however, and investors are waiting for a number of key U.S. employment indicators that could determine the Fed’s rate hike calendar. On Tuesday, the focus will be on JOLTS job offers data, although the most critical event of the week will be Thursday’s non-farm payrolls (NFP) report. June employment data is expected to show a net escalate in employment of 110,000, after 172,000. in May, confirming that the US economy continues to create jobs at a solid pace.

On the geopolitical front, press reports that US and Iranian negotiators have arrived in Doha to resume peace talks, although it is unclear when they will meet. Nevertheless, markets still hope for a negotiated solution to the conflict that will keep oil prices at pre-war levels and provide some support for the euro.