Forex Today: All eyes on ECB's policy announcements

Here is what you need to know on Thursday, July 21:

Investors remain on the sidelines and the market mood remains cautious early Thursday ahead of the European Central Bank's (ECB) highly-anticipated policy announcements. Later in the day, the US economic docket will feature the weekly Initial Jobless Claims data and the Federal Reserve Bank of Philadelphia's Manufacturing Survey. Meanwhile, the US Dollar Index stays relatively quiet near 107.00 and US stock index futures post modest losses.

The ECB is forecast to hike key rates by 25 basis points (bps) following its July policy meetings. Earlier in the week, however, some reports suggested that ECB policymakers were set to discuss a 50 bps hike. Additionally, the bank is expected to unveil its new anti-fragmentation tool. Previewing the ECB meeting, "the ECB decision has become more consequential for the euro – and arguably with more downside risks – after the report discussing a 50 bps rate hike," said FXStreet analyst Yohay Elam. "Given the specter of a Russian gas cut off and rationing, it is hard to see the bank vowing to raise borrowing costs by a certain amount in September. It is still a long time off."

ECB Preview: Three critical factors to watch, and why EUR/USD is set to plunge.

Meanwhile, Nord Stream 1 pipeline resumed gas flows following the 10-day maintenance. German Energy Regulator Bundesnetzagentur said on Thursday that the pre-maintenance level of 40% capacity could be exceeded today. Meanwhile, Italy is expected to go into a snap election in later September after Italian Prime Minister Mario Draghi announced that he will resign.  

Earlier in the day, the Bank of Japan (BOJ) left its policy settings unchanged as expected. Commenting on the policy outlook, BOJ Chief Haruhiko Kuroda reiterated that they will not hesitate to ease the monetary policy further if necessary. The USD/JPY pair edged higher during the Asian trading hours and was last seen trading in positive territory near 138.50.

EUR/USD trades sideways below 1.0200 after having snapped a three-day winning streak on Wednesday.

GBP/USD stays on the back foot early Thursday and continues to edge lower toward 1.1900. 

Gold plunged below $1,700 and was last seen trading deep in negative territory near $1,690. The benchmark 10-year US Treasury bond yield holds in positive territory above 3%, putting additional weight on XAU/USD's shoulders.

Bitcoin is down more than 1% near $23,000 in the early European session. Ethereum continues to edge lower and fluctuates below $1,500 after having registered modest losses on Tuesday and Wednesday.