Investing.com – The U.S. dollar steadied in early European trade on Thursday, while the euro rose ahead of the European Central Bank’s latest policy-setting meeting.
At 04:00 ET (0900 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, rose marginally to 104.265.
Dollar on the back leg
The dollar steadied on Thursday but has traded mostly lower this week, helped in part by the benchmark falling to a two-month low as softening labor market conditions in the United States strengthened the case for the Fed to cut rates this year. .
Data released Wednesday showed the rate grew more slowly than expected in May after rising slightly the previous day.
There will be more labor market data later on Thursday in the form of weekly data ahead of the highly anticipated monthly release on Friday.
Markets have priced in nearly 50 basis points of Fed rate cuts this year, the first of which is expected in September.
ECB intends to cut rates
However, the main event of the day will come in Europe, where interest rates will be cut for the first time since 2019, helped by signs that inflation in the eurozone currency area is falling towards the ECB’s target of 2%.
The central bank is expected to cut its deposit rate to 3.75% from a record 4.0%, while consumer prices have fallen from more than 10% at the end of 2022 to just above the central bank’s 2% target.
However, recent data showed prices rose, drawing attention to ECB President Christine Lagarde’s accompanying press conference as the market looks for clues about future policy steps.
“Risks to the euro appear to be slightly skewed to the upside today, but we doubt this will be a huge event for the FX market,” ING analysts said in a note. “Unless President Lagarde changes some of her eloquence (she appears to have deliberately made press conferences uneventful), then the foreign exchange market may be left with more questions than answers.”
traded 0.1% higher at 1.0873 and down 0.1% at 1.2780, with both pairs seeing narrow trading ranges ahead of the ECB meeting.
Bank of Japan meeting approaches
In Asia, shares traded 0.1% higher at 156.31 but remained well below recent peaks.
The meeting is scheduled for next week and policy is expected to tighten then. Bank of Japan Governor Kazuo Ueda said earlier on Thursday that it would be prudent to reduce the central bank’s bond purchases as it nears an exit from massive monetary stimulus.
Traded mostly at 7.2474, remaining close to a six-month high hit in May as sentiment on China worsened in recent sessions as traders awaited more signals on the country’s plans to strengthen economic growth.