The euro fell as far as $1.038, approaching a two-week low, as investors stepped up their bets on a deeper divergence between European and US interest rates. Weak inflation figures in Germany and France on Friday reinforced the argument that the European Central Bank would continue its monetary easing this year after a rate cut on Thursday.

Markets are now fully integrating three more rate cuts by the ECB before the end of the year, and predicting a near 30% chance of a fourth. The European Central Bank may have to go further if US President Donald Trump follows through on his promise to impose punitive tariffs.

Meanwhile, the Federal Reserve kept rates unchanged on Wednesday and hinted at a pause. Investors are now turning their attention to next week's broader Eurozone inflation data.

Let's not forget, however, that the cards may yet be completely reshuffled if Donald TRUMP hammers home the idea that US rates are too high and must be cut quickly, regardless of the opinion of the Federal Reserve, which has only one objective: to bring inflation down.