EUR/USD has been unable to hold on to Friday's NFP-inspired gains, ING's FX analyst Chris Turner notes.

More volatility in a 1.1650-1.1750 range looks likely

"Holding the euro back is no doubt French politics, where Prime Minister Francois Bayrou today holds a vote of confidence in his planned 2026 budget. It looks like very few of the opposition parties have plans to tackle France's 5%+ of GDP budget deficit and would prefer to bring down the government. The outcome of such a vote could be President Emmanuel Macron asking Bayrou to stay on, Macron selecting a new technocrat PM, or Macron calling early elections."

"We see the risk of the French-German government bond spread moving through 80bp here - but we are not looking for a eurozone-wide period of stress. Italy and Spain have been enjoying sovereign upgrades recently, and the European Central Bank has its Transmission Protection Instrument (TPI) if things really get out of hand. In short, we tend to see this as a localised French issue - where a potential sovereign downgrade from Fitch (currently AA-, negative outlook) this Friday evening won't help either."

"More volatility in a 1.1650-1.1750 range looks likely for EUR/USD this week, and we doubt Thursday's ECB meeting will be a big market mover."