The US dollar fell on Monday following President Joe Biden's decision to end his re-election campaign, with the euro benefiting despite a weak tone following last week's European Central Bank meeting.
The US dollar index that measures the greenback against six major currencies traded 0.2% lower at 103.942, reversing after posting its first weekly gain in three weeks.
The dollar has slumped following news over the weekend that President Biden will no longer seek re-election, endorsing Vice President Kamala Harris as his successor.
"Investors will now turn their attention to how Kamala Harris fares with Donald Trump in the polls assuming he is named the presidential candidate at the Democratic National Convention on August 19-22," said analysts at ING.
The dollar has received a boost as the possibility of a Trump presidency has increased following Biden's poor debate performance last month and questions about his age and health.
The week's key economic data will arrive on Friday, with June's personal consumption expenditure index set to test market expectations that the Federal Reserve will almost certainly cut interest rates in September.
Economists expected the PCE price index to rise by 0.1% for the second month in a row, which would bring three-month annual core inflation down to its slowest pace this year, below the Fed's 2% target.
EUR/USD rose 0.2% to 1.0893, rebounding after weakness following the European Central Bank holding rates steady at its meeting last week.
"This week's euro zone business sentiment readings, scheduled for Wednesday and Thursday, will help shape the narrative that policy is too tight and may prompt some weakness for the euro," ING said.
Markets are expecting almost two ECB rate cuts for the rest of the year.
GBP/USD traded 0.1% higher at 1.2931, after hitting the 1.30 level for the first time in a year last week following a decisive election victory for the Labor Party, ending 14 years of Conservative rule.
"Some people are no doubt making the case that this is the elimination of the Brexit risk premium in sterling, helped by new Prime Minister Keir Starmer's desire to engage more closely with Europe," ING said.
"While we sympathize with that view, we attribute sterling strength more to UK inflation and expect a BoE rate cut this year, plus a weaker US dollar in July following softer US price data."
