Euro fell in European trade on Thursday against a basket of major rivals, heading for the second loss in a row against the dollar and plumbing two-week lows after giving up the psychological level of $1.08 amid concerns about the interest rate gap between Europe and the US.

Markets are expecting multiple European rate cuts this year after data showed German inflation slowed down more than expected.

On the other hand, the odds that the Federal Reserve will cut interest rates in the summer have heavily declined.

Prices

EUR/USD fell 0.1% to $1.0788, the lowest since May 14, with a session-high at $1.0805.

The EUR/USD pair fell 0.55% on Wednesday, the heftiest loss since April 22 following German inflation data.

German Inflation

German consumer prices rose 0.1% m/m in May, below estimates of 0.2%, and compared to a 0.5% rise in May.

The data likely hints at weak overall Eurozone inflation data for May.

European Rates

The inflation data boosted the odds of multiple European Central Bank interest rate cuts this year, with investors now awaiting even more data this month to gauge the likely path ahead.

US Rates

A string of bullish US data and aggressive remarks by Fed officials reduced the odds of a Fed interest rate cut in November.

Now investors await important US GDP growth data later today in addition to unemployment claims data, and personal spending data tomorrow.

Interest Rate Gap

The current Eurozone-US interest rate gap stands at 100 basis points, the lowest since 2022, and will likely expand to 125 basis points in June in favor of the US.