• EUR/USD drops from 1.0800 as investors turn cautious ahead of key US inflation readings and Eurozone Q1 GDP data.
• Eurozone price index is on track to return to 2% as service inflation eases to 3.7%.
• The US inflation data will influence Fed rate-cut prospects for September.

EUR/USD falls slightly below the round-level resistance of 1.0800 in Tuesday’s European session. The major currency pair drops as investors await the release of the United States Consumer Price Index (CPI) for April and the Eurozone’s preliminary Q1 Gross Domestic Product (GDP) data, which will be published on Wednesday. 

US consumer inflation data will significantly influence speculation for the Federal Reserve (Fed) rate cuts, which it is expected to begin from the September meeting. US CPI remained hotter than expected in the first quarter of the year due to tight labor market conditions and robust household spending. Therefore, investors will keenly focus on it as the continuation of the release of hot readings will force traders to pare bets for Fed rate cuts in September. Hot inflation reading will also offset the Fed rate-cut optimism built on easing labor market conditions.