The euro declined in European markets on Wednesday against a basket of global currencies, retreating from a two-week high versus the US dollar. The currency is on track for its first loss in four sessions, driven by profit-taking and a rebound in the US dollar following a major trade deal between the US and Japan.

Later today, markets await the start of the European Central Banks (ECB) highly anticipated monetary policy meeting, with expectations pointing to an unchanged interest rate. Traders are looking for clues on whether the ECB may resume its easing cycle later this year.

The Price

EUR/USD slipped by 0.2% to $1.1731, down from an opening price of $1.1754, after hitting a session high of $1.1756.

On Tuesday, the euro climbed 0.55% against the dollar, marking its third consecutive daily gain and reaching a two-week peak at $1.1761 on rising odds of a US rate cut in September.

US Dollar

The US Dollar Index rose by 0.15% on Wednesday, attempting to rebound from a two-week low of 97.31 points. It is on course to log its first gain in four sessions, reflecting a modest recovery in the greenback against major currencies.

Beyond technical buying at lower levels, the dollar's rebound was supported by a significant trade deal between the US and Japan, which eased concerns over a potential recession in the world's largest economy.

On Tuesday, President Donald Trump announced a "massive" trade agreement with Japan, including reciprocal tariffs of 15% on Japanese exports to the US and a reduction in tariffs on Japanese vehicles from 25% to 15%.

European Central Bank

The ECB meets today and tomorrow to evaluate its monetary policy stance amid recent economic developments across the eurozone.

The bank is widely expected to keep its key interest rate unchanged at 2.15%, the lowest level since October 2022.

Markets are closely watching for signs of further easing and potential rate cuts later this year.

Eurozone Rates Outlook

According to Reuters sources, a clear majority at the last ECB meeting favored leaving rates unchanged in July, with some members calling for a longer pause.

Money markets currently price in a 30% chance of a 25 basis-point ECB rate cut in July.