Ella 
In Asia on Monday, EUR/USD rebounded to around 1.0650 from the five-month low of 1.0622 hit last Friday. The U.S. dollar moved higher as geopolitical turmoil led to increased dollar buying, putting downward pressure on EUR/USD.
Over the weekend, Iran launched explosive drone and missile attacks on Israel in retaliation for a suspected Israeli attack on its consulate in Syria. Despite the escalation in the Middle East, markets have remained relatively calm, possibly because Iran provided advance notice of the attack, which helped reduce the risk of further escalation.
According to Reuters, officials in Turkey, Jordan and Iraq said Iran had given advance notice days before the attack, allowing it to take steps to prevent mass casualties and deterioration of the situation. However, a U.S. official denied this. In addition, US President Joe Biden told Israel that the United States would not engage in any retaliatory actions.
The EUR/USD currency pair is under downward pressure as the monetary policy outlooks of the European Central Bank and the Federal Reserve (Fed) diverge. The European Central Bank said it may consider cutting its policy rate in June if underlying inflation continues to slow as expected.
In contrast, strong inflation and macroeconomic indicators in the United States have prompted the Federal Reserve to reconsider plans to implement loose monetary policy. The probability of keeping rates on hold at the June meeting has risen to 63.5% from 46.8% last week, according to the CME FedWatch tool. Investors will pay close attention to seasonally adjusted euro zone industrial production data and U.S. retail sales data released on Monday.
