The euro declined in European trading on Monday against a basket of global currencies, as part of a corrective pullback after Fridays sharp rally. The single currency gave up a two-week high versus the US dollar due to profit-taking and technical selling.

European inflation figures for July came in hotter than expected, reinforcing inflationary pressures on European Central Bank policymakers and reducing the likelihood of a rate cut in September.

Price Overview

EUR/USD fell by 0.35% to $1.1550, down from the opening price of $1.1589. The pair recorded a session high of $1.1597 the highest level since July 28.

On Friday, the euro surged 1.5% against the dollar, marking its second straight daily gain and its strongest one-day performance since April 10, as it continued to recover from a two-month low of $1.1400.

In addition to bargain buying at lower levels, Fridays gains were driven by better-than-expected eurozone inflation data and downbeat US labor market figures.

US Dollar

The US Dollar Index rose by 0.3% on Monday, attempting to recover from Fridays steep losses, reflecting renewed demand for the greenback against a basket of major currencies.

This rebound comes as markets await further confirmation regarding the likelihood of a Federal Reserve rate cut in September, particularly in light of ongoing remarks from Fed officials.

European Interest Rates

Eurozone consumer prices rose by 2.0% in July, beating market expectations of a 1.9% increase and matching the previous months 2.0% reading.

The data indicates persistent inflationary pressure on ECB policymakers.

According to Reuters sources, a clear majority of ECB members favored keeping interest rates unchanged at the upcoming September meeting for a second consecutive time.

Market pricing for a 25-basis-point ECB rate cut in September remains below 30%.

Investors will closely monitor upcoming eurozone data and ECB commentary to reassess those odds.