Investing.com – The US dollar was steady in early European trade on Thursday, while the euro rose ahead of the European Central Bank's latest policy-setting meeting.
At 04:00 EST (09:00 GMT), the dollar index, which tracks the US currency against a basket of six other currencies, rose slightly to 104.265.
The dollar is on the back foot
The dollar steadied on Thursday, but was trading largely lower this week, weighed in part by a fall in the benchmark index to a two-month low, as easing labor market conditions in the United States increased the case for a Fed rate cut this year. .
Data released on Wednesday showed a rise at a slower-than-expected rate in May, following the preliminary reading the previous day.
There is more labor market data to study later on Thursday, in the form of weekly data, before the expected monthly reading on Friday.
Markets have priced in nearly 50 basis points of Fed rate cuts this year, with the first cut expected to take place in September.
The European Central Bank is preparing to cut interest rates
However, the main event of the day is in Europe, where interest rates are set to cut for the first time since 2019, supported by signs that inflation in the eurozone currency area is falling towards the ECB's 2% target.
The central bank is widely expected to cut its deposit rate to 3.75% from a record 4.0%, with consumer prices falling from more than 10% in late 2022 to just above the central bank's target of 2%.
However, recent data has seen prices rise, putting the spotlight on ECB President Christine Lagarde's accompanying press conference, as the market looks for clues about future policy moves.
“The risks to the euro appear to be slightly tilted to the upside today, but we doubt this will be a major event for FX,” analysts at ING said in a note. “Unless President Lagarde revamps some of her eloquence (she appears to have deliberately held quiet press conferences), the FX market may be left with more questions than answers.”
The euro traded 0.1% higher at 1.0873 and 0.1% lower at 1.2780, with both pairs seeing tight trading ranges ahead of the ECB meeting.
Bank of Japan meeting looms
In Asia, trading rose 0.1% to 156.31, but remained well below recent peaks.
They are scheduled to meet next week and are expected to tighten the policy after that. Bank of Japan Governor Kazuo Ueda said earlier Thursday that it would be appropriate to reduce the central bank's bond buying as it moves toward exiting massive monetary stimulus.
It traded largely flat at 7.2474, staying close to six-month highs hit in May, with sentiment towards China deteriorating in recent sessions as traders await more signals on the country's plans to support economic growth.