• EUR/USD stays pressured at the lowest levels in 10 weeks.
• Political turmoil in Spain, unimpressive ECB talks and fears of German recession weigh on Euro.
• Risks surrounding US debt-ceiling agreement’s passage through Congress, hawkish Fed bets also favor bears.
• Mid-tier EU/US data, developments about efforts to avoid US default will be eyed for intraday directions.

EUR/USD bears flirt with the 1.0700 threshold as full markets return on Tuesday, after Monday’s holiday in multiple bourses. The Euro pair’s latest weakness could be linked to the fresh challenges to sentiment, as well as a comparatively less hawkish bets on the European Central Bank (ECB) than the Federal Reserve (Fed).

Despite the sluggish start of the week, due to holidays in major markets, the political turmoil in Spain joined doubts about the ECB’s capacity to extend its hawkish run to weigh n the EUR/USD price.

On Monday, Spanish Prime Minister (PM) Pedro Sanchez announced snap elections in July while Greek President is up for appointing a caretaker PM ahead of a repeat elections on June 25. Additionally, the last week’s downward revision to Germany’s first quarter (Q1) Gross Domestic Product (GDP) figures renewed recession fears in the bloc and weigh on the EUR/USD prices.

Even so, ECB Policymaker Pierre Wunsch said on Saturday, “We hiked 400bp and we might have to do more.”

On the other hand, market sentiment improved after the US policymakers sealed the deal to avoid the US default. However, the agreement’s passage through the Congress is a concern amid dissatisfaction with the compromises cited to reach the deal.

Elsewhere, upbeat prints of the US PMIs, Durable Goods Orders and Q1 GDP and inflation signals underpin hawkish bias about the Fed despite expectations that the debt ceiling deal pushes the government for mode bond issuance and exhaust liquidity from the markets.

With this, the European yields edge lower while the equities grind higher and the US Dollar takes a breather around multi-day high.