The euro struggled on Tuesday to recover from its sharp losses, as investors began to realize that the terms of the trade agreement between the United States and the European Union largely favored Washington and offered little improvement to the EU's economic outlook. Meanwhile, the US dollar maintained its gains.

France on Monday described the framework trade deal as a "dark day for Europe," saying the bloc had yielded to President Donald Trump under an unbalanced agreement that imposed 15% tariffs on European goods.

German Chancellor Friedrich Merz said the German economy would suffer "significant" damage as a result of the agreed tariffs.

The euro had dropped by 1.3% in the previous session, marking its largest daily decline in over two months, amid concerns over growth and a decline in eurozone government bond yields.

The euro failed to regain those losses and was recently trading slightly lower by 0.02% at $1.1584.

Ray Attrill, Head of FX Strategy at National Australia Bank, said: "It didnt take long for markets to conclude that while the news appears relatively positive, its ultimately negative when it comes to its near-term impact on eurozone growth."

He added: "The deal was strongly condemned by France, while others including Chancellor Merz spoke of the negative consequences for exporters and, by extension, economic growth."

The euros decline supported the dollar, which jumped 1% against a basket of currencies overnight.

The dollar held steady on Tuesday, pushing the British pound to a two-month low of $1.3338, while the Japanese yen rose 0.2% to 148.22 yen per dollar. The dollar index held flat at 98.66.

Thierry Wizman, global currency and interest rate strategist at Macquarie Group, said:

"While the strength of the US dollar may reflect the perception that the new trade agreement between the US and the EU leans in Washingtons favor, it may also reflect a sense that the US is reengaging with the EU and its key allies."

However, Trump said Monday that most trade partners who are not negotiating separate deals will soon face tariffs ranging from 15% to 20% on their exports to the US significantly higher than the 10% blanket tariff he imposed in April.

In other currency markets, the Australian dollar rose 0.04% to $0.6524, while the New Zealand dollar was little changed at $0.5970.

The Chinese yuan in the domestic market hit a one-week low at 7.1794 per dollar, as investors awaited the outcome of trade talks between Washington and Beijing.

Top economic officials from the US and China met in Stockholm on Monday for more than five hours of talks aimed at resolving longstanding economic disputes behind the ongoing trade war between the worlds two largest economies, in an attempt to extend the current three-month truce.

Alongside the trade negotiations, investors this week are also awaiting interest rate decisions from both the US Federal Reserve and the Bank of Japan.

Both central banks are expected to keep interest rates unchanged, but traders will closely monitor their post-meeting statements for clues on the timing of any future monetary policy moves.