Peter Nurse

Investing.com – The U.S. dollar and the euro stabilized in early European trade Thursday,  with traders cautious ahead of a widely-anticipated meeting of the European Central Bank which should signal the tightening of its monetary policy.

The, which monitors the greenback against a basket six other currencies at 3:10 am ET (0710 GMT) traded mostly unchanged at 102.545.

The price of gold edged up to 1.0716 after trading in a range-bound manner for most of the week as traders anxiously await the news from the

It is expected that the central bank will announce the termination of the long-running asset purchasing program and open the door to a new increase in interest rates next month. 

Current consensus expectations are for 25-basis point hikes in July and September to lift the deposit rate from 0.5%. But there is a great deal of uncertainty surrounding the size of any hikes and the pace of the future tightening, especially with inflation currently running at more than four times the central bank’s 2% medium-term goal.

The ECB meeting “will raise the question of why it’s delayed tightening and whether a 25bp rate rise in July is a done deal or if there’s room for more,” said analysts at ING, in a note. 

“Any message that does not signal an openness to a 50bp hike would likely fall short of the market’s hawkish expectations and push EUR/USD closer to 1.0500.”

All around the world, central banks are responding to rising inflation with tightening their money policy. Last month the rate of inflation rose by 50 basis point, and this week it was increased by both central banks.

The ECB will announce its policy at 7:45 am ET (1145 GMT) and the press conference follows 45 minutes later.

After climbing to an earlier 20-year peak of 134.54 in the previous year, it fell 0.3% to 133.22. The Bank of Japan is the most unusual central bank worldwide and continues to maintain its accommodative Monetary Policy to help a weaker economy as the rest of the globe tightens.

Goldman Sachs, however, maintained its bullish position on Japan’s currency. They see two main scenarios where the yen will strengthen. One, in an American economic downturn. Two, thanks to central bank intervention.

It fell 0.2% to 1.2514 ahead of a speech from the British Prime Minister about making it easier for young adults to buy houses. He is trying to restart his leadership role after being defeated by a no confidence vote earlier in this week. 

After the May release of more-than-expected Chinese data, the risk sensitive dropped 0.2% to 0.7179. It edged up to 0.6448 while it sank to 6.6828.