The euro resumed its decline against a basket of major global currencies during European trading on Tuesday, falling against the US dollar after a three-day recovery streak and moving back toward its lowest level in 13 months. The single currency is now on track for a second consecutive monthly loss as investors continue to favor the US dollar as the preferred investment and reserve currency in the foreign exchange market.

Later today, Germany will release its June inflation report, which is expected to provide important clues about whether the European Central Bank could raise interest rates again before the end of the year.

The Price

EUR/USD fell 0.25% to $1.1395 from an opening level of $1.1422, after touching an intraday high of $1.1426.

The euro closed Monday up 0.35% against the US dollar, marking its third consecutive daily gain as the currency continued to recover from its 13-month low of $1.1325.

In addition to bargain buying from lower levels, the euro also benefited from the agreement between the United States and Iran to halt hostilities and resume technical negotiations under the previously agreed 60-day framework.

Monthly performance

For June, which officially concludes at todays settlement, the euro is down 2.3% against the US dollar and remains on track for a second straight monthly loss.

The decline reflects strong demand for the US dollar following the Federal Reserves hawkish policy meeting under its new chairman, Kevin Warsh.

Demand for the dollar as a safe-haven alternative has also been supported by the fallout from the Iran conflict and the continued military tensions between the United States and Iran.

European interest rates

Reports indicate that the European Central Bank is considering pausing further policy normalization in July if energy prices remain near current levels.

Money markets continue to price roughly a 30% probability of a 25-basis-point ECB rate hike at the July meeting.

Investors are now awaiting Germanys June inflation data later today, which could significantly reshape expectations for European interest rates.

Euro outlook

According to Economies.com, if German inflation data comes in softer than market expectations, the likelihood of another ECB rate increase this year could decline further, potentially leading to additional losses for the euro against a basket of global currencies.