The euro fell on Thursday ahead of a European Central Bank meeting in which policymakers may express caution about slowing economic growth.
The euro has lost around 1.6 per cent of its value over the last two weeks as investors bet the ECB will keep monetary policy accommodative for an extended period.
The ECB is considered to reinforce its plan to raise interest rates by the end of the year but traders will focus
on how explicitly, if at all, the central bank acknowledges the slow-down.
If recent weaker-than-expected economic activity in Germany and France leads ECB President Mario Draghi to point to a potentially longer lasting slowdown, that could hurt the euro.
“We see a risk of modest dovish bias from Draghi today given the long stream of the soft euro zone data and look for the euro to test 1.1310 dollar,” said ING FX strategist Petr Krpata.
At 0830 the euro was down 0.2 per cent at 1.1355 dollar.
Germany, France and Italy, the euro zone’s biggest economies, barely grew in the fourth quarter and French business activity fell unexpectedly this month, a survey showed on Thursday.
The ECB holds its first meeting of the year at a time when concerns are also growing about global trade tensions and Brexit.
Sterling traded marginally lower at $1.3043, hovering near highs last seen in mid-November in a sign traders expect Britain to avoid a chaotic exit from the European Union.
Some analysts expect limited upside for sterling. Philip Wee, currency strategist at DBS says that most of the gains in the pound are due to the unwinding of short positions.
He sees sterling capped in the range of $1.3170-1.3240.
Since Prime Minister Theresa May’s divorce deal with the EU was rejected by lawmakers last week, lawmakers have been trying to plot a course out of the crisis but no option has the majority support of parliament.
The dollar index, a gauge of its value versus six major peers, was steady at 96.06.
The greenback remains hamstrung versus its rivals, restrained by concerns over global growth, the U.S. government shutdown and a yet-unresolved U.S.-Sino trade dispute.
The Aussie dollar was a big mover in the Asian session, trading half a percent lower at $0.7104 after National Australia Bank said it would raise mortgage rates by 12 to 16 basis points.
Earlier, the Aussie was in positive terrain on the back of solid jobs data.
