Euro gives up $1.07, plumbs two-month low

Euro declined in European trade for the sixth straight session against dollar, giving up $1.07 and plumbing two-month lows amid concerns about a widening policy gap between Europe and the US.

In Europe, doubts are mounting about additional rate hikes in the next two months following somewhat bearish remarks by European Central Bank officials.

In the US, chances of a 0.25% interest rates by the Federal Reserve in June are growing following strong US data and bullish remarks by Fed officials.

EUR/USD fell 0.3% to 1.0673, the lowest since March 20, with a session-high at 1.0726, after losing 0.15% on Monday, the fifth loss in a row, and the longest such streak of losses since February. 

European Remarks

Spanish Central Bank President Pablo Hernandez said the ECB might end the cycle of policy tightening soon.

Such remarks cast doubts on the chances of more interest rate hikes in June and July.

European Rates

The ECB remains one of the slowest major banks in battling inflation, with European interest raters so far the sixth highest in the G8 global central banks. 

Now investors await crucial European data on inflation for May later this week, to gauge the path ahead for policies in Europe. 

The Dollar

The dollar index rose 0.3% on Tuesday for the seventh straight session, hitting two-month highs at 104.53 against a basket of major rivals. 

Such gains come amid increasing likelihood for the Federal Reserve to raise interest rates by 25 basis points in June. 

Last week's US data showed the GDP grew more than expected in the first quarter, while US unemployment claims were below estimates, and as US consumer spending rose more than expected in April.

US Rates

Following such data and bullish remarks by Fed officials, chances of a 0.25% Fed rate hike in June rose from 40% to 62%. 

Policy Gap

The current interest rate gap between Europe and the US stands at 150 basis points, and its possible for the gap to increase to nearly 200 basis points this month.