Euro finds more demand ahead of ECB meeting

A reasonably healthy set of corporate earnings on Tuesday led to a dispelling of fears that aggressive monetary tightening would weigh heavily on the bottom lines of companies. Thus, European markets today will likely continue to take on the same positive tone seen in Asia Wednesday after the main indices closed sharply higher on Wall Street on Tuesday.

According to Reuters, Russian gas flows via the Nord Stream 1 pipeline will resume on time on Thursday after scheduled maintenance has been completed, which will ease investors' concerns about a gas shortage in Europe.

However, gains are still likely to be limited as investors await Thursday's crucial European Central Bank meeting, which is widely expected to result in the central bank raising interest rates for the first time since 2011 as early as this week. 

Early European trade Wednesday saw the US dollar weaken, with the euro seeing some demand ahead of the European Central Bank meeting.

While policymakers signalled at the last June meeting that a quarter-point hike was likely, there is still mystery surrounding the meeting suggesting the ECB is considering a 50-basis-point rate increase for the Eurozone because inflation is running at a higher rate at 8.6%.

Wednesday's UK consumer price data showed the extent of regional inflationary pressures, as prices rose 9.4% on an annual basis in June, up from 9.1% the previous month. Governor Andrew Bailey also said on Tuesday that a 50-basis-point rate hike would be "one of the choices on the table" at the next meeting of the Bank of England. There have already been five increases in the bank's borrowing costs since December. The GBP/USD rose about 0.1% to 1.2003 after British consumer price inflation surged to the highest rate since 1982.

Events of today

On Wednesday, Statistics Canada will announce the consumer price index for June. The Canada CPI is expected to follow along with the phenomenon of rising inflation worldwide, keeping the pace at a 0.8% rise. 

Investors will also be watching the rest of the US housing data on Wednesday, as the existing home sales report is due. After new home sales fell in June, existing home sales are expected to slide from 5.41M to 5.38M in June. This will be a sign of a broader cooling down in the US housing market.