Euro Stays Capped Below 1.1500 Amid Rising German Political Uncertainty

The euro traded on the defensive against the US dollar on Monday, last seen around 1.14789, remaining under pressure below the 1.1500 handle. The pair had earlier touched a seven-week low of 1.1454 last week, a level that continues to serve as key support on the downside.

**German Political Turmoil as a Key Drag**

Market concerns over the poor performance of Chancellor Merz's ruling party in a northeastern state election are the core driver weighing on the euro in this cycle. This political uncertainty has offset the positive impact from lower oil prices, leaving the euro's rebound momentum weak. Meanwhile, Germany's April consumer confidence index deteriorated, further reinforcing cautious sentiment over the eurozone's economic outlook.

**Dollar Strength and Cooling Risk Appetite**

While the euro's own fundamentals remain soft, the US dollar continues to find demand, adding extra pressure on the single currency. Geopolitical factors continue to weigh on risk assets, prompting fund flows into the safe-haven dollar. Against this backdrop, the euro has fallen for a third consecutive trading day against the dollar, with technicals indicating additional downside risks after breaking below the 1.1500 level.

**Near-Term Focus on Support and Event Developments**

At present, the euro trades near 1.14789 against the dollar, closing in on the seven-week low of 1.1454 set last week. Should German political deadlock show no signs of easing, or if upcoming economic data further softens, the pair may test that support level. Markets are closely monitoring further developments in German politics and key eurozone economic indicators due later this week.