The U.S. dollar steadied in early European trade Thursday, while the euro gained ahead of the latest policy-setting meeting by the European Central Bank. 

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose marginally to 104.265.

Dollar on the back foot

The dollar has steadied Thursday, but has been trading largely on the back foot this week, weighed in part by the benchmark U.S. 10-year Treasury yieldsliding to a two-month low as easing labor market conditions in the United States added to the case for Fed rate cuts this year.

Data released on Wednesday showed that private payrollsincreased at a slower-than-anticipated rate in May, following on from a softjobs openingsprint the day before.

There is more labor market data to study later Thursday, in the form of the weekly jobless claims, ahead of Friday’s keenly-anticipated monthlyjobs report.

Markets have priced in nearly 50 basis points of Fed rate cuts this year, with the first expected to come in September.

ECB set to cut rates

However, the day’s main event is in Europe, with the European Central Bankset to cut interest rates for the first time since 2019, buoyed by signs that inflation in the euro zone currency area is easing toward the ECB's 2% target.

The central bank is widely expected to trim its deposit rate to 3.75% from a record 4.0%, with consumer prices having fallen from more than 10% in late 2022 to just above the central bank’s 2% target.

That said, recent data has seen prices turn higher, bringing ECB President Christine Lagarde’s accompanying press conference firmly into focus, as the market looks for clues about future policy moves.

“The risks to the euro appear slightly tilted to the upside today, but we doubt this will be a huge event for FX,” said analysts at ING, in a note. “Unless President Lagarde revamps some of her eloquence (she has seemingly made press conferences intentionally uneventful), then the FX market may be left with more questions than answers.”

EUR/USDtraded 0.1% higher to 1.0873 andGBP/USDfell 0.1% to 1.2780, with both pairs seeing tight trading ranges ahead of the ECB meeting.

BOJ meeting looms

In Asia, USD/JPYtraded 0.1% higher to 156.31, but remained well below recent peaks.

The Bank of Japanis set to meet next week and is expected to potentially tighten policy then. BOJ Governor Kazuo Ueda said earlier Thursday it would be appropriate to reduce the central bank's bond buying as it moves toward an exit from massive monetary stimulus.

USD/CNYtraded largely flat at 7.2474, remaining close to six-month highs hit in May, as sentiment towards China soured in recent sessions as traders awaited more cues on the country’s plans to shore up economic growth.