Investing.com - The euro dipped against the dollar on Thursday as investors remained cautious ahead of the European Central Bank’s policy meeting later in the day, amid heightened concerns over the threat of deflation in the euro zone.
EUR/USD edged down 0.04% to 1.3759, pulling back from the one-week highs of 1.3819 reached on Wednesday.
The pair was likely to find support at 1.3704, the low of March 28 and a one-month trough and resistance at 1.3819.
Recent weak euro zone inflation data has added to pressure on the ECB to take steps to stave off the risk of deflation.
On Wednesday, International Monetary Fund head Christine Lagarde urged the central bank to do more to combat low inflation in the region, warning that slow price growth could undermine the fragile global recovery.
The annual rate of inflation slowed to 0.5% in March, data on Monday showed, the lowest since November 2009. The ECB targets an inflation rate of just under 2%. Another report on Wednesday showed that euro zone producer prices fell in February.
However, most investors expected the ECB to leave monetary policy on hold, after Bundesbank head Jens Weidmann said over the weekend that the euro zone is not in a deflationary cycle, and that the recent slowdown in inflation was due in large part to temporary factors, such as falls in food and energy prices.
The euro was steady against the yen, with EUR/JPY trading at 143.01, not far from the three-week high of 143.46 reached on Wednesday.