The euro fell in European trading on Wednesday against a basket of major currencies, retreating from a one-week high versus the US dollar and heading toward its first loss in six sessions, as the greenback rebounded ahead of the Federal Reserves policy decision.

Renewed inflationary pressure in the eurozone has dampened expectations that the European Central Bank (ECB) will cut interest rates during its meeting later today. The meetings outcome is expected to provide fresh clues on the path of European rates through the remainder of this year and into next.

Price Overview

EUR/USD declined 0.2% to 1.1627, down from an opening level of 1.1651, after touching a session high of 1.1661.

The euro had gained about 0.1% on Tuesday its fifth straight daily rise reaching a one-week high of 1.1669 amid improved risk sentiment.

US Dollar

The dollar index rose more than 0.2% on Wednesday, rebounding from a one-week low and heading for its first gain in three sessions, reflecting renewed strength in the US currency ahead of the Feds policy announcement later today.

The Fed is widely expected to deliver a 25-basis-point rate cut its second consecutive reduction though policymakers could adopt a slightly more hawkish tone given signs of renewed inflationary pressure in the US, potentially lowering the odds of another rate cut before year-end.

European Central Bank

The ECB begins its policy meeting later today to assess appropriate monetary policy in light of recent economic developments across the euro area, with a decision due Thursday.

The Bank is widely expected to keep interest rates unchanged at 2.15%, the lowest level since October 2022, marking a third consecutive hold.

Markets are looking for guidance on when the ECB might resume its easing cycle and potentially lower rates again before year-end.

Euro Outlook

According to Economies.com: If the Federal Reserves comments turn out more hawkish than markets anticipate, expectations for another US rate cut this year will likely fade a scenario that would support continued dollar gains against major counterparts, particularly the euro and the British pound.