The U.S. dollar was on the back foot in early European trade Tuesday, with traders positioning for a more hawkish stance from the European Central Bank than the Federal Reserve ahead of next week’s policy-setting meetings.

At 02:50 ET (06:50 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, traded marginally lower at 101.070, close to a new 10-day low after falling 0.4% overnight.

The U.S. Federal Reserve is widely expected to raise rates by another 25 basis points at next week’s policy-setting meeting, but expectations are growing that the central bank will start cutting interest rates later this year.

Economic data of late has pointed to a slowing U.S. economy, while news overnight of plunging deposits at First Republic Bank (NYSE:FRC) highlighted the fragility of the country’s banking system.

First-quarter U.S. GDP data, due Thursday, is expected to show that growth slowed from the prior quarter, and it would take a sharp upward surprise from Friday’s PCE price index – the Fed’s preferred inflation gauge – to change the dovish narrative.

“Unless Friday’s US March core PCE inflation markedly surprises above the consensus 0.3% month-on-month figure, expectations for one last Fed hike look locked in and we doubt the dollar needs to rally too much further,” said analysts at ING, in a note.

EUR/USD rose 0.1% to 1.1048, with a hefty 50 basis point hike remaining a live option at next week’s central bank meeting.

German business morale rose slightly in April, according to the Ifo institute’s business climate index, released Monday, adding to hopes that Europe’s largest economy has managed to have dodged a winter recession.

Additionally, April inflation reports from the region’s largest economies Germany, France, and Spain, due later this week, are likely to point to inflationary pressures remaining elevated.

This all points to the ECB hiking rates next week, with central bank board member Isabel Schnabel telling Politico that a 50 bps rate hike was not off the table and would depend on data.

GBP/USD fell 0.1% to 1.2473, drifting off a 10-day high hit earlier with the Bank of England also expected to hike rates next week after consumer prices rose 10.1% in March from a year earlier, driven by the strongest increase in food costs in more than four decades.

AUD/USD dropped 0.2% to 0.6681 ahead of Wednesday’s Australian CPI data, while USD/JPY traded flat at 134.22, ahead of new Governor Kazuo Ueda’s first policy meeting in charge of the Bank of Japan.