Euro declined in European trade on Tuesday against a basket of major rivals, backing away from two-week highs against the dollar on profit-taking ahead of important eurozone inflation data.

As inflationary pressures wane off, the European Central Bank is likely to start cutting interest rates in June, heaping pressures on the currency.

Euro is heading for the fourth monthly loss in a row amid concerns about the potentially increasing interest rate gap between the euro zone and the US in the summer.

EUR/USD

EUR/USD fell 0.3% to $1.0690, with a session-high at $1.0730, after rising 0.3% on Monday, resuming gains and approaching a two-week high at $1.0753.

The earlier gains were underpinned by improving risk appetite following strong earning results by major European corporations.

European Inflation

German and Spanish consumer prices data were below estimates for April, indicating that inflation pressures are receding.

European Rates

Such data, combined with bearish remarks by European Central Bank officials, boosted the likelihood of a June interest rate cut.

Inflation Data

Now investors await total eurozone inflation data for April, expected up 2.4%, same as the previous reading.

Monthly Trades

Euro is down 0.9% so far in April against the dollar, on track for the fourth monthly loss in a row.

Interest Rate Gap

The eurozone-US interest rate gap now stands at 100 basis points, and is expected to rise to 125 basis points in June in favor of the US.