Euro fell in American trade away from December 19, 2014 highs against the dollar, following a basket of data from the euro zone and the US, the world's largest economy, and after the Socialist Democratic Party in Germany refused a coalition deal with Angela Merkel's Christian Democrats, deepening uncertainty.
As of 04:15 GMT, EUR/USD fell 0.24% to 1.2234 from the opening of 1.2264, with an intraday low at 1.2195, and a high at 1.2283.
Earlier German data showed consumer prices rose 0.6% in December, up from 0.3% in November, while wholesale prices ell 0.3% in December, compared to a 0.5% rise in October, while analysts expected a slowdown in growth to 0.3%.
An European Central Bank official said earlier that euro zone inflation hasn't reached the ECB's 2% target yet, noting that all possibilities regarding monetary easing will be discussed after September.
Markets are considering possible policy tightening by the European Central Bank in the January 25 meeting, especially after the latest ECB minutes showed confidence in achieving inflation and growth targets, which could lead to an earlier end to the 30 billion euros a month assets purchase program.
Inversely, chances of a Fed rate hike in March fell after a spate of disappointing US inflation data, in turn bashing the greenback to 2015 lows and underpinning the euro.
President Donald Trump commented on the chances of closing the government in the US with no knowledge on the matter, noting that in case no deal was reached between the Democrats and the Republicans, the government would be shut from January 19.
Otherwise, earlier US data showed the Empire State Manufacturing Index dipped to 17.7 in January from 18, missing expectations of 18.5.