European Stock Market News - Euro Inched Up

Euro takes back some ground lost to dollar ahead of ECB

A picture illustration shows Euro and U.S. dollar banknotes in Sarajevo March 9, 2015.

The dollar gave back some of its overnight gains against the euro on Tuesday after hitting a 10-day high ahead of this week's European Central Bank meeting, which some investors believe could set the stage for additional stimulus later this year.

The Canadian dollar, meanwhile, edged lower against its U.S. counterpart after Liberal leader Justin Trudeau won a stunning election victory over Prime Minister Stephen Harper's Conservatives.

The euro inched up slightly to $1.1331 EUR=, after dropping as low as $1.1306 on Monday, but its gains were seen limited ahead of Thursday's ECB meeting as it comes against a backdrop of deflationary pressure.

Lower oil prices helped push euro zone consumer prices into negative territory last month, which some believe could prompt the ECB to eventually expand or extend its asset purchase program.

Many economists believe such a move would be most likely to come in December if the ECB's quarterly economic forecasts due early that month prove disappointing.

Economists polled by Reuters expect the ECB to extend its plan to buy 60 billion euros of assets a month of mostly government bonds beyond its planned end-date of September 2016.After the ECB, investors' main focus will be the U.S. Federal Reserve's policy meeting on Oct. 27-28. [FED/DIARY]

Investors remain divided about whether the U.S. central bank will deliver its first rate hike since 2006. Interest rate futures indicated on Monday that traders were pricing in a 52 percent chance of the Fed raising rates in March 2016, according to the CME Group FedWatch.