The EUR/USD pair has continued to stabilize, but still seems to lack enough steam to meaningfully rebound given lingering political risk and fiscal concerns weighing on the common currency, ING FX strategists note.

EU members to face the excessive deficit procedure

“What shouldn’t help the mood in European markets today is the EU Commission’s announcement of which countries will face the excessive deficit procedure. Italy and Poland already said they will be included in the list, and media reports suggest five more countries will face the infringement procedure – including France.”

“Our rates team believes there are lingering risks that EU bond spreads re-widen into the 30 June French vote after a couple of calm sessions this week. The 10-year OAT-Bund rate gap was 77bp at yesterday’s close, 5bp below Monday’s peak.”

“The eurozone calendar only includes a speech by the European Central Bank's Mario Centeno today, and we still think the unstable risk environment and downside risks for peripheral bonds will keep EUR/USD capped in the near term