Euro declined in European trade on Monday against a basket of major rivals, sharpening losses for the second straight session against the dollar and plumbing five-week lows after the announcement of early French elections.

French president Emanuel Macron decided to dissolve the Parliament and call for early elections after the governing party lost the EU elections to the far right.

Euro is also pressured by renewed concerns about the widening Europe-US interest rate gap as the odds of Fed rate cuts this year decline.

The Price

The EUR/USD fell 0.5% today to $1.0748, the lowest since May 9, with a session-high at $1.0802.

The EUR/USD pair lost 0.85% on Friday, the largest loss since April 10 following strong US labor data.

The pair also lost 0.5% last week, after the European Central Bank cut interest rates by 0.25 basis points while casting doubt on future rate cuts.

Early French Elections

French President Emanuel Macron dissolved the parliament and called for early legislative elections after the results of the EU Parliament elections.

The governing French party lost the EU elections to the far right, forcing Macron to gamble with the new local elections to try and reassert authority.

Analysts note that the odds of a surprise win by the far right in French elections will keep the euro under pressure in the short term.

The ECB

The European Central Bank cut interest rates last week as expected, however it failed to provide strong hints of upcoming cuts this year.

In fact, according to a Bloomberg report, ECB members have ruled out another interest rate cut in July.

Interest Rate Gap

The current Europe-US interest rate gap stands at 125 basis points in favor of the US and will likely remain so throughout the summer.