The euro slipped against its major counterparts in the European session on Wednesday, as German bond yields dropped after talks between Merkel's CDU and her CSU allies to resolve their differences over migration policy ended in failure.
Merkel's interior minister Horst Seehofer, leader of the CSU, has drawn up plans to send back migrants at the border if they have already registered in another European country. But the Chancellor advocates that any change in policy must be coordinated at an EU level.
Merkel is due to address the German parliament, the Bundestag, on Thursday morning and will fly to Brussels to meet with the leaders of the other EU states.
The benchmark yield on 10-year note fell 0.32 percent. Yields move inversely to bond prices.
Data from the European Central Bank showed that loans to Eurozone private sector increased at a faster pace in May.
Adjusted loans to the private sector grew 3.3 percent year-on-year in May, following April's 3 percent increase.
The euro slipped to a 5-day low of 1.1606 against the greenback, from a high of 1.1672 hit at 3:15 am ET. The next possible support for the euro is seen around the 1.15 level.
The single currency dropped to 2-day lows of 127.58 against the yen and 1.1523 against the franc, compared to Tuesday's closing values of 128.17 and 1.1531,respectively. Next key support for the euro is likely seen around 125.00 against the yen and 1.14 against the franc.
The 19-nation currency weakened to a 5-day low of 1.5435 against the loonie and a 2-day low of 1.5702 against the aussie from an early high of 1.5535 and 6-week high of 1.5826, respectively. On the downside, 1.53 and 1.56 are likely seen as the next support levels for the euro against the loonie and the aussie, respectively.
Having advanced to near a 6-week high of 1.7114 against the kiwi at 2:20 am ET, the euro reversed direction and eased to 1.7023. If the euro continues its fall, 1.67 is possibly seen as its next support level.
On the flipside, the euro rose back to 0.8824 against the pound, not far from more than a 2-week high of 0.8828 seen at 4:00 am ET. The euro is seen challenging resistance around the 0.89 area.
Data from Nationwide Building Society showed that UK house prices increased at a slower pace in June.
House prices grew 2 percent year-on-year in June, following May's 2.4 percent increase. Nonetheless, the pace of increase was faster than the expected 1.7 percent.
Looking ahead, U.S. pending home sales for May are due shortly.