Investing.com - The euro trimmed back gains against the dollar on Thursday after the European Central Bank kept interest rates unchanged and reiterated they can be cut again in the future if necessary.
EUR/USD was at 1.0549 at 08.07 ET from around 1.0565 ahead of the announcement.
The ECB left the main refinancing rate on hold at zero, while the deposit rate was unchanged at -0.4%. The marginal lending rate remained at 0.25%.
The ECB kept borrowing costs on hold despite data showing that the annual rate of inflation in the euro area rose to 2% this month.
In its statement, the bank reiterated that it expects rates to remain "at present or lower levels for an extended period of time, and well past the horizon" of its bond-buying program, which is scheduled to run through at least December.
The ECB also resisted pressure to start tightening monetary policy, saying that it stands ready to extend the size or the duration of its asset purchase program if the economic outlook worsens.
ECB President Mario Draghi is to hold a news conference at 08.30 ET.
The euro also pared back gains against sterling and the yen, with EUR/GBP last at 0.8663, from around 0.8684 earlier and EUR/JPY at 120.87, down from 121.11.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 102.11, not far from the March 2 high of 102.27.
Demand for the dollar continued to be underpinned after strong U.S. private sector hiring data underlined expectations for a Federal Reserve rate hike next week, as investors looked ahead to Friday’s government employment report for February.
A rate increase at the Fed’s March 14-15 meeting is seen as a near certainty following recent hawkish comments by Fed policymakers, including Chair Janet Yellen.
Futures traders are pricing in around a 90% chance of a hike at next week’s meeting, according to Investing.com’s Fed Rate Monitor Tool.