2017.07.1906:40:00UTC+00Euro Drops Ahead Of ECB Announcement

The euro slipped against its major opponents in early European deals on Wednesday, as investors resorted to profit taking before the European Central Bank monetary policy announcement tomorrow, which is unlikely to announce any change in key rates or asset purchase program.

The 25-member governing council is widely forecast to leave its refi rate unchanged at zero percent, marginal lending facility at 0.25 percent and the deposit rate at -0.4 percent. The central bank is expected to keep the monthly bond-buying program of ?60 billion.

Market participants eagerly await the press conference by the ECB President Mario Draghi for more clues about the course of monetary policy in the coming months.

Many investors expect an announcement for a reduction in bond purchases to come in September, after hawkish comments from Draghi in Sintra last month.

German yields slipped, with the benchmark yield on the 10-year note down by 0.54 percent. Yields move inversely to bond prices.

Even though the euro area has escaped the risk of deflation through stimulus measures embarked by the central bank, the inflation is far away target, the ECB policymaker Francois Villeroy de Galhau said to the finance commission of France's lower house of parliament.

"We have made progress, but we have not yet reached the target and so there is still a need for our accommodative monetary policy," Villeroy told.

Data from Eurostat showed that Eurozone construction output declined in May after recovering in April.

Construction output fell 0.7 percent in May from April, when it rose 0.3 percent. Civil engineering slid 0.9 percent and building construction dropped 0.6 percent in May.

The euro showed mixed performance in the Asian session. While the euro held steady against the greenback and the franc, it fell against the yen and the pound.

The euro that ended Tuesday's trading at 0.8860 versus the pound and 1.4589 versus the loonie dropped to 0.8838 and 1.4556, respectively. The euro is likely to find support around 0.86 against the pound and 1.43 against the loonie.

The euro hit a 6-day low of 1.0993 against the franc, after having advanced to 1.1036 at 5:45 pm ET. If the euro extends decline, it may target support around the 1.08 region.

The common currency to 1.1515 against the greenback, from a high of 1.1556 hit at 5:15 pm ET. On the downside, 1.13 is likely seen as the next support for the euro.

Reversing from an early high of 129.54 against the yen, the euro weakened to a 2-day low of 129.00. The next possible support for the euro is seen around the 127.00 region.

The 19-nation currency fell to a 2-day low of 1.5623 against the kiwi and a 2-1/2-month low of 1.4526 the aussie, off its early highs of 1.5732 and 1.4603, respectively. Continuation of the euro's downtrend may it challenging support around 1.54 against the kiwi and 1.42 against the aussie.

Looking ahead, Canada manufacturing sales for May and U.S. building permits and housing starts for June are set for release in the New York session.