Forex – Euro at 6-month highs, pound recovers early losses – The euro bounced to fresh six-month highs against the U.S. dollar on Monday following remarks by German Chancellor Angela Merkel, sending the dollar to a fresh six-month trough against a currency basket.

EUR/USD hit a high of 1.1245, the most since November 9 and was at 1.1245 by 10.46 ET.

The gains in the euro came after Merkel said the single currency was “too weak”.

Speaking in Berlin, Merkel said Germany’s record trade surplus was partly due to the European Central Bank’s expansionary monetary policy, which has driven down the euro.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.24% at 96.76, which was its deepest trough since November 9.

The index had risen to the day’s highs earlier amid relative calm in U.S. politics with President Donald Trump on a trip to the Middle East.

With Trump on his first official overseas trip as president the steady stream of revelations surrounding the FBI’s investigation into alleged Russian interference in November’s presidential election has receded.

The index ended the previous week down 2.12%, having given up all the gains it had made following the presidential election in November amid fears that the U.S. political system could become engulfed by crisis, preventing lawmakers from pushing through tax or spending reforms.

The dollar was lower against the yen, with USD/JPY slipping 0.21% to 111.03 amid simmering geopolitical tensions with North Korea.

Sterling was little changed against the dollar, with GBP/USD at 1.3025.

The pound fell to intra-day low of 1.2965 earlier after polls showing that the Conservative Party’s lead has narrowed ahead of UK elections due to be held on June 8 amid a backlash over proposals for a shakeup in social care.

Sterling regained ground as British Prime Minister Theresa May did a U-turn over a proposal to make elderly people pay for care in their own home unless they have less than £100,000 in assets.

Market watchers had been confident that May would secure a strong win in the election, strengthening her hand in Brexit negotiations and allowing her to ignore lawmakers pushing for a hard Brexit.