Investing.com - The U.S. dollar traded in a tight range in early European trade Thursday, while the euro edged higher ahead of a widely-watched European Central Bank policy meeting.
At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded just lower at 103.017, still not far from the six-week high of 103.82 seen on Tuesday.
Dollar awaits fourth-quarter GDP
The dollar has stabilized Thursday, dropping back slightly from the highs seen earlier in the week as traders consolidate positions ahead of the Federal Reserve's policy meeting next week.
Traders have been scaling back expectations of early rate cuts from the Fed following pushback from central bankers and the release of data that has underscored the resiliency of the U.S. economy.
Markets are now pricing in roughly a 50-50 chance of a cut in March, down from over 80% a month ago.
There is more key data to digest before next week’s Fed meeting, starting with the first reading of fourth-quarter U.S. gross domestic product later in the session.
This is expected to show 2% annualized growth, a hefty drop from the 4.9% growth seen in the third quarter, but still indicating that the U.S. avoided a recession in 2023.
Euro steady ahead of ECB
In Europe, EUR/USD traded 0.1% higher at 1.0896, ahead of the latest meeting of the European Central Bank.
The central bank is virtually certain to keep interest rates at record highs, but there remains uncertainty over the future and when the officials will decide that they can start cutting rates in an attempt to boost growth in the bloc.
Markets had expected a cut as soon as April, but have been dialing back pricing over the past few weeks as policymakers have pushed back on this aggressive pricing.
With this in mind, President Christine Lagarde's post-meeting news conference will be of particular interest.
“We would say that the ECB event risk … proves a mild upside risk to EUR/USD - but the carpet could be pulled from under the euro should President Lagarde somehow convey the message that the policy rate will be getting cut in the summer after all,” said analysts at ING, in a note.
GBP/USD traded just higher at 1.2728, with sterling traders searching for cues ahead of next week’s Bank of England policy-setting meeting.
Yen hands back some gains
In Asia, USD/JPY rose 0.1% to 147.65, with the yen slipping slightly after sharp gains earlier this week. These came as Bank of Japan Governor Kazuo Ueda offered more signals on a potential pivot away from negative interest rates - which were a key pain point for the yen over the past two years.
USD/CNY traded 0.2% higher to 7.1683, with the yuan slipping slightly after having received some support earlier in the week on hopes of improved Chinese economic prospects after the PBOC reduced banking reserve requirements.