Euro Falls Amid ECB Rate Cut Speculation

The euro weakened against other major currencies in the European session on Wednesday, as traders speculate that the European Central Bank (ECB) will cut its deposit rate in the policy meeting tomorrow.

The European Central Bank's policy announcement is due on Thursday. The bank is likely to lower the rate by 25 basis points to 2.75 percent.

Investors look ahead to the Federal Reserve's monetary policy announcement due later in the day.

The U.S. central bank is widely expected to leave interest rates unchanged, but traders will pay close attention to the accompanying statement for clues about the outlook for rates.

Amid concerns that the United States' (US) implementation of tariffs on the Eurozone will impair its economic outlook, investors have also priced in three additional interest rate cuts of 25 basis points in the next three meetings.

In the European trading today, the euro fell to nearly a 3-week low of 0.8364 against the pound and an 8-day low of 0.9423 against the Swiss franc, from early highs of 0.8388 and 0.9441, respectively. If the euro extends its downtrend, it is likely to find support around 0.81 against the pound and 0.93 against the franc.

Against the U.S. dollar and the yen, the euro dropped to a 6-day low of 1.0395 and 161.55 from early highs of 1.0444 and 162.49, respectively. The euro may test support near 1.02 against the greenback and 157.00 against the yen.

Looking ahead, U.S. mortgage approvals data, goods trade balance for December, retail and wholesale inventories data for December and U.S. EIA crude oil data are slated for release in the New York session.

At 9:45 am ET, the Bank of Canada will announce its interest rate decision at the monetary policy meeting. The bank is expected to slash the policy rate 25bps to 3.00%.

After 45 minutes, the Bank of Canada Governor Tiff Macklem will speak at a press conference.

At 2:00 pm ET, the U.S. Federal Reserve is set to announce its first monetary policy decision of 2025. The Fed expect the federal funds rate to remain unchanged in the 4.25%-4.50% range.

Half-an-hour later, the U.S. Fed Chair Jerome Powell will speak at a press conference on future rate cuts and the Fed's economic outlook.