The euro dropped against its major counterparts in the Asian session on Thursday, as investors looked forward to monetary policy decision from the European Central Bank for more clarity about its stimulus plans amid an improvement in the bloc's economic outlook.

The ECB decision is due at 7:45 am ET, followed by press conference with chief Christine Lagarde at 8:30 am ET.

The central bank is expected to hold its main refi rate at a record low of zero percent and the deposit rate at -0.50 percent. The marginal lending facility rate is forecast to remain at 0.25 percent.

The increased bond purchases under the Pandemic Emergency Purchase Programme is expected to continue in order to prevent a surge in borrowing costs on financial markets.

ECB officials signaled that they are in no rush to slow the pace of purchases under the 1.85 trillion euro Pandemic Emergency Purchase Programme, or PEPP.

The ECB will publish its new staff projections and it is forecast to raise the inflation outlook.

Also in focus is key U.S. inflation data, due out later in the day. The data is closely watched to assess the timing of Fed tapering and the prospect of interest rate hikes.

The euro depreciated to a 3-day low of 1.2162 against the greenback and a 2-day low of 133.18 against the yen, off its prior highs of 1.2181 and 133.55, respectively. The euro is likely to find support around 1.20 against the greenback and 130.00 against the yen.

The euro declined to a 3-1/2-month low of 1.0896 against the franc, from a high of 1.0914 hit at 8:00 pm ET. On the downside, 1.06 is likely seen as its next support level.

The European currency reached as low as 0.8618 against the pound, after gaining to 0.8632 at 8:15 pm ET. If the euro continues its fall, 0.84 is possibly seen as its next support level.

The euro weakened to 1.5718 against the aussie, 1.6927 against the kiwi and 1.4734 against the loonie, reversing from its early highs of 1.5767 and 1.6990 and a 10-day high of 1.4760, respectively. The next possible support for the euro is seen around 1.54 against the aussie, 1.66 against the kiwi and 1.46 against the loonie.

Looking ahead, the European Central Bank will announce interest rate decision at 7:45 am ET. The ECB is expected to hold its main refi rate at a record low zero percent and the deposit rate at -0.50 percent.

U.S. CPI for May, weekly jobless claims for the week ended June 5 and monthly budget statement for May are scheduled for release in the New York session.

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