Euro Falls On Reports Of ECB Lowering Inflation Outlook As Decision Nears

The euro slipped against its major counterparts in the European session on Wednesday, after a media report suggested that the European Central Bank may downgrade its inflation outlook for the next three years due to weak energy prices, ahead of the monetary policy announcement due tomorrow.

The ECB is preparing to revise down inflation forecast to around 1.5 percent each year in 2017, 2018 and 2019, Bloomberg reported citing euro-area officials. The ECB staff projection in March had put inflation rates of 1.7 percent in 2017, 1.6 percent in 2018 and 1.7 percent in 2019.

The outlook will be presented to the Governing Council, which is gathering for a two-day meeting in Tallinn.

The report added to hopes that the central bank is likely to remain dovish for the time being.

Data from Destatis showed that Germany's factory orders declined more than expected in April.

Manufacturing new orders declined 2.1 percent month-on-month in April, reversing a revised 1.1 percent increase in March.

Meanwhile, European stocks are higher in the run-up to a trio of potential major risk events on Thursday.

The currency held steady against its major rivals in the Asian session.

The euro hit 1.0839 against the Swiss franc, lowest since May 5. This may be compared to a high of 1.0862 hit at 3:00 am ET. The euro is poised to target support around the 1.07 region.

The euro slipped to a 6-day low of 1.1204 against the greenback, 8-day low of 0.8682 against the pound and a 3-week low of 122.63 against the yen, from its early highs of 1.1282, 0.8739 and 123.52, respectively. The next possible support for the euro is seen around 1.10 against the greenback, 0.84 against the pound and 120.00 against the yen.

The euro also weakened to a weekly low of 1.5064 against the loonie, new 3-week low of 1.4823 against the aussie and a 1-1/2-month low of 1.5571 against the kiwi, off its previous highs of 1.5175, 1.5030 and 1.5717, respectively. Continuation of the euro's downtrend may see it challenging support around 1.48 against the loonie, 1.45 against the aussie and 1.53 against the kiwi.

Looking ahead, Canada building permits and U.S. consumer credit for April are set for release in the New York session.