Euro rose in European trade on Monday against a basket of major rivals, resuming gains and approaching two-month highs amid expectations of further advances above the $1.09 barrier due to interest rate outlook.

Now markets await more clues about potential European interest rate cuts after the likely cut in June, while waiting for similar clues about US rates.

The EUR/USD Pair

The EUR/USD Pair rose 0.2% to $1.0884 today, with a session-low at $1.0862.

Euro fell 0.2% on Friday away from a two-month high at $1.0895.

The pair rose 0.95% last week, marking the fifth weekly profit in a row.

European Rates

The markets are now prepared for a likely 0.25% interest rate cut by the European Central Bank in June, with the cut already priced in.

Recent European data showed the German economy performed better than expected in the last quarter of 2023, while business sentiment rose to two-year highs.

Such data hurt the odds of multiple more ECB rate cuts after the June cut, with investors now await important data on European inflation and growth.

US Data

Recent US producer and consumer prices data boosted the odds of two 0.25% rate cuts by the Federal Reserve this year, likely in September and November.

There could even be a third rate cut in 2024 if inflation continued to slow down alongside the labor sector.

Rate Gap

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

Such a cut was already priced in the EUR-USD pair movements, with the focus now on the monetary decisions that follow the June meeting.