The US dollar stabilized in early European trading Thursday, after overnight losses, while the euro pushed above parity ahead of an expected jumbo hike by the European Central Bank.

At 03:00 ET (07:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.2% to 109.745, after having earlier fallen to 109.373, its lowest level in over a month.

The dollar has fallen back from recent highs amid gathering expectations that the US Federal Reserve will shortly shift to less aggressive interest rate hikes after a hike of another 75 basis points next week.

This follows the release of weak housing data, with data released Wednesday showing new home sales slumped over 10% in September.

However, "it should be clear by now that the housing sector is firmly in the firing line of the Fed's restrictive policy, but it will be important to see other sectors of the US economy slowing for the Fed to conclude that aggregate demand is soft enough to offset supply constraints," analysts at ING said, in a note.

That said, the main focus on Thursday will be a rate decision by the European Central Bank, with markets expecting it to deliver a 75 bp rate hike.

EUR/USD dropped 0.2% to 1.0057, even as the forward-looking German GfK consumer sentiment index rose slightly to -41.9 in November, from a downwardly revised -42.8 in October.

"It is certainly too early to speak of a trend reversal at the moment. The situation remains very tense for consumer sentiment," said GfK consumer expert Rolf Buerkl.

However, the pair remains above parity with the ECB set to lift its main interest rate to the highest in more than a decade to tackle record Eurozone inflation.

GBP/USD fell 0.3% to 1.1591, falling back from its highest level since Sept. 13 after traders had reacted positively to a degree of political stability as new Prime Minister Rishi Sunak took charge. keeping Jeremy Hunt as Chancellor.

"The UK's sovereign credit default swap has now recovered to pre 'fiscal event' levels, while gilt-bund spreads are now back near the 150bp levels seen in early September," added ING.

USD/JPY traded 0.5% lower at 145.64, with the yen recovering against the dollar. It's debatable how long this can last further intervention, given the Bank of Japan is widely expected to maintain rates at ultra-low levels at its meeting on Friday.

AUD/USD fell 0.1% to 0.6489, NZD/USD rose 0.2% to 0.5845, and USD/CNY rose 0.6% to 7.2152, as data showed China's industrial profits sank for a third consecutive month in September.