The US Dollar opened the week on a relatively flat note as risk aversion holds its grip on global markets amidst political turmoil in France. President Emmanuel Macron's call for snap legislative elections has sparked concerns among investors, fearing a potential shift towards a far-right-dominated parliament. This apprehension prompted a sell-off in French assets, exacerbating sovereign bond spreads across Europe. The widening spreads, particularly evident between French and German 10-year benchmark bonds, reflect escalating market distress and raise the specter of ECB intervention to stabilize regional bond markets.

From a technical standpoint, EURUSD appears to have incorporated the anticipated risks associated with increased political influence from right-wing factions in France. The price rebounded after testing the lower boundary of an ascending support trendline near 1.0650. However, expectations for further recovery are tempered by significant uncertainty surrounding the upcoming snap elections in France, which could further weaken positions held by left-wing parties. 

In the near term, EURUSD may see a potential move above the 1.07 level, which could trigger another round of selling pressure, potentially breaching the aforementioned support line. Investors considering long positions on the currency pair should exercise caution, as the prevailing risks notably favor downside movements for the Euro:

With European sovereign bond spreads reaching alarming levels, the European Central Bank faces mounting pressure to uphold monetary policy coherence across the Eurozone. The ECB's singular policy rate struggles to mitigate divergent inflationary pressures and economic vulnerabilities arising from disparate bond yields among member states. A failure to address widening spreads could precipitate localized inflation spikes or deflationary risks, potentially necessitating ECB intervention to forestall sovereign debt defaults and mitigate systemic financial instability.

In the United States, Minneapolis Fed Bank President Neel Kashkari's remarks hint at a probable interest rate cut later this year, potentially in December. The focus remains on upcoming Retail Sales figures and Purchasing Managers Index (PMI) data, pivotal indicators that could sway market sentiment either towards a weaker USD on disappointing US economic performance or bolster it amidst European political volatility. 

Meanwhile, the British Pound Sterling continues to falter against the USD, marking its third consecutive trading day of losses. The GBP/USD pair hovers near monthly lows amid the Federal Reserve's hawkish stance on interest rates, which bolsters the USD's attractiveness. Market attention shifts to the UK Office for National Statistics upcoming CPI report, with expectations of a notable decline in core CPI to 3.5% and headline inflation nearing the Bank of England's 2.0% target. Of particular interest is service inflation, pivotal in shaping the BoE's policy normalization decisions amidst persistent economic uncertainties.

Looking at the near-term technical outlook for GBPUSD, recent price action indicates a significant shift in sentiment as the currency pair broke below a narrow ascending channel. This suggests that the previous optimism surrounding the Pound has waned. The downward movement was further intensified by a sell-off triggered when the price approached a key medium-term resistance line, which had previously acted as a barrier in July 2023 and March 2024.

Currently, the bullish momentum faces considerable challenges in regaining traction. There is a heightened risk of a trend reversal rather than a mere pullback within the trend. Market sentiment appears to favor a scenario where the price drifts lower before any potential reconsideration of a bullish outlook could materialize. Potential downside targets for GBPUSD are around the 1.26 and 1.2550 levels: