The euro hovered just above $1.14, little changed from recent sessions, as rising oil prices heightened inflation concerns.
Crude climbed back above $72 per barrel after attacks in the Strait of Hormuz underscored ongoing risks to shipping.
Traders boosted bets on ECB rate hikes after official Isabel Schnabel warned of lingering economic effects from the Iran conflict, with core inflation still elevated.
However, gains were capped by softer inflation data and dovish comments from ECB President Christine Lagarde, who cited last week a more balanced outlook for euro-area inflation and growth.
Germany’s cabinet approved a 2027 budget draft on Monday, with €555.4 billion in planned spending and borrowing rising to €203.6 billion, up from April’s €196.5 billion estimate.
In France, a Paris court will rule on Tuesday on Marine Le Pen’s appeal against an election ban for misusing EU funds, a decision that could impact her 2027 presidential bid amid rising political uncertainty.