On Wednesday, the euro to dollar exchange rate dropped ahead of the interest rate decision of the European Central Bank.
Accordingly, the EUR/USD pair plummeted 0.07% to 1.16, following its Tuesday plunge of 0.09%.
Moreover, the euro is under pressure as investors widely expected that the central bank would retain its current track for monetary policy.
Last September, the Governing Council argued that the recent hike in inflation was temporary and could fade in the medium term.
Subsequently, they emphasized that there is no need for earlier policy tightening, weighing down the currency.
Consequently, traders anticipated that ECB President Christine Lagarde would stick to the sidelines as the committee relied heavily on the non-standard tools of the Council.
In line with this, the euro to dollar exchange rate could face headwinds if the central bank retains its 2021 interest rate decision.
On the other hand, a material adjustment in the forward guidance for monetary policy could push gains for the currency pair.
Moreover, hints of an ECB exit strategy from its pandemic emergency purchase program could generate a bullish reaction towards the euro.
On the economic data front, Germany’s GfK consumer climate improved to 0.90 from the previous figure of 0.40.
Remarkably, it also came in higher than the analysts’ forecast of -0.50.
However, its import prices declined to 1.30% from the prior data of 1.40%, also missing the expected 1.50%.
Similarly, the euro to franc exchange rate weakened 0.27% to 1.06.
At the same time, the euro to yen exchange rate lowered 0.56% to 131.58.
Conversely, the euro to sterling exchange rate edged up to 0.26% to 0.84.
US Dollars Edged Higher as Euro Skidded
Meanwhile, the USD edged higher in calm trading as the euro declined ahead of the Federal Reserve’s meeting next week.
The US dollar index, which tracks the greenback against its major peers, extended 0.02% to 93.97. Also, it further supported its hike of 0.15% yesterday.
Furthermore, the USD to CAD exchange rate increased 0.21% to 1.24.
Then, the GBP to USD exchange rate shed 0.24% to 1.37.
Also, the AUD to USD exchange rate dwindled 0.03% to 0.75 after a slew of economic data.
Subsequently, the Australian consumer price index (CPI) dropped to 3.00% year-over-year from the previous rate of 3.80%.
On the other hand, its core CPI rose to 2.10% from the anticipated 1.60%, touching the Reserve Bank of Australia’s target of 2.00% to 3.00%.
Inversely, the USD to JPY exchange rate curtailed 0.46% to 113.61.
Similarly, the USD to CHF exchange rate lost 0.18% to 0.92.
