The U.S. dollar edged lower in early European trade Thursday, adding to the previous session's losses in the wake of the Federal Reserve's latest meeting, while the euro climbed ahead of the European Central Bank's expected rate hike.

At 02:55 ET (06:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 100.580, after dropping around 0.3% on Wednesday.

The U.S. Federal Reserve raised interest rates by 25 basis points at the end of its two-day policy-setting meeting on Wednesday, as widely expected, and Chair Jerome Powell left the possibility of another hike in September alive.

EUR/USD rose 0.1% to 1.1097, with the ECB next up in terms of policy decisions. It is also widely expected to raise rates by 25 bps at the conclusion of its meeting later on Thursday, and consequently, the focus will be on its forward guidance.

Inflation remains elevated in the eurozone, with annual CPI at 5.5% in June, but growth is slowing and recent comments from council members have tended towards the dovish side.

USD/JPY fell 0.2% to 140.00, with the yen not far removed from a one-week high against the dollar, ahead of a widely anticipated Bank of Japan meeting on Friday.

The central bank is expected to hold interest rates at record lows and maintain its yield curve control policy. However, with Japanese inflation proving sticky, the potential for a surprise exists.

Elsewhere, GBP/USD rose 0.2% to 1.2966, AUD/USD rose 0.7% to 0.6804, as the Aussie dollar rebounded from steep losses in the prior session, while USD/CNY fell 0.1% to 7.1422.

Source : Investing.com