Investors monitor ECB meeting and U.S. inflation amid hopes for Ukraine's talks

European markets are set to open higher as risk sentiment improves, following indications that Ukraine is ready for diplomacy with Russia. Despite the recent panic on the markets, the euro held most of its overnight gains on Thursday, having experienced its steepest daily rise in nearly six years. Gold extended its losses and posted its most significant daily drop in 14 months. Meanwhile, oil posted its most profound daily fall by 12% in nearly two years.

Short-term market sentiment reversed

Following the announcement that the United Arab Emirates, an OPEC+ member, would support increased output, oil experienced its most significant daily drop in nearly two years, hitting 104 dollars per barrel.

Emirates officials' comments came as the market also took into account moves by the United States to ease sanctions on Venezuelan oil and efforts to seal a nuclear deal with Tehran, which could lead to more oil supplies from Iran later this year.

The talks between the foreign ministers of Russia and Ukraine set for Thursday in Turkey also caused the market to cool down.

ECB policy meeting

Later in the day, traders will be watching a European Central Bank meeting for any indication of how Russia's invasion of Ukraine will affect monetary policy. 

ECB interest rates are not expected to change according to consensus. In its view, ECB asset purchases could be altered, and communications could be reframed to disassociate interest rate hikes from their timing. However, the ECB press conference comments following the next are almost sure to be more influential. 

Before the Russian invasion on Feb. 24, inflation in the eurozone was at a record high, and policymakers had been expected to announce an end to money-printing stimulus, paving the way for an interest rate hike this year. However, the war has shattered that consensus. The 25 individuals on the ECB Governing Council will enter the meeting divided, raising the risk of a policy surprise. Yet, no one can expect the ECB to begin normalizing monetary policy at a time of such uncertainty.

U.S. inflation data

The U.S. inflation figures are due as well, which could help guide expectations for the Federal Reserve's meeting next week. It's expected that inflation has run at a 7.9% annualized rate in February, which will be another historical record.