The greenback spiked on Wednesday with caution prevailing ahead of the Federal Reserve's meeting conclusion, the euro weakened as the European Central Bank officials prepared to meet on Thursday.

The Fed is largely anticipated to keep rates unchanged on Wednesday, with traders closely monitoring its remarks on inflation for insights into future interest rate decisions, especially amid recent concerns over U.S. tariffs.

Since Donald Trump's inauguration, the dollar has fluctuated unpredictably, driven primarily by changing tariff expectations.

Trump has signaled potential 25% tariffs on imports from Canada and Mexico starting February 1, while also warning of possible tariffs on the EU and China.

The dollar index that gauges the greenback versus its major pairs added 0.2% to 107.850, yet it remained slightly down for the week.

EUR/USD slid by 0.1% to 1.0423, as data revealed that German consumer sentiment is expected to weaken heading into February, reflecting rising economic pessimism among households.

The European Central Bank is set to meet on Thursday and is widely anticipated to lower interest rates again, following a total of four cuts in 2024.

GBP/USD dropped 0.1% lower to 1.2432.

USD/JPY dropped 0.2% to 155.29, Tokyo's inflation data, set for release on Friday, is expected to draw significant attention this week.