The euro was lower against its most major counterparts in the European session on Thursday, as European markets fell, tracking a sell-off on Wall Street and in Asia, as investors continued to worry about higher interest rates and the risk of a recession.

Cleveland Federal Reserve President Loretta Mester said that the fed funds rate will be required to rise above 4 percent by early next year.

Mester added that she does not anticipate the Fed cutting interest rates in 2023 and that rates would remain elevated "for some time."

The CME Group's FedWatch is suggesting a 72.5 percent chance of a 75 basis point rate hike this month.

Money markets now expect a 75 basis point interest rate hike from the European Central Bank at next week's meeting in the aftermath of yesterday's record-high inflation data.

The euro dropped to 0.9774 against the franc, off an early high of 0.9835. Next likely downside target for the currency is seen around the 0.965 level.

The euro reversed from a prior 2-month high of 0.8663 against the pound and weakened to 0.8629. The euro is seen finding support around the 0.85 level.

The euro fell to 139.48 against the yen, 1.6392 against the kiwi and 1.4654 against the aussie, from its early multi-week highs of 140.00, 1.6477 and 1.4741, respectively. The next possible support for the euro is seen around 135.00 against the yen, 1.61 against the kiwi and 1.34 against the aussie.

In contrast, the euro climbed to 1.3245 against the loonie, its highest level since August 10. The currency is likely to locate resistance around the 1.34 level.

The euro rebounded modestly against the greenback, with the pair trading at 1.0030. If the euro rises further, 1.08 is possibly seen as its next resistance level.

Looking ahead, Canada building permits for July, U.S. ISM manufacturing PMI for August and construction spending for July are set for release in the New York session.

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