Financial markets remain relatively quiet following Monday's subdued action. Bank of England Governor Andrew Bailey and other policymakers will testify on monetary policy before the UK Treasury Select Committee during the European trading hours. Stock and bond markets in the US return to action following a long weekend. The benchmark 10-year US Treasury bond yield holds steady at around 4.3% and US stock index futures trade in negative territory. On Wednesday, we will have the FOMC meeting minutes which will gather much attention.

EUR/USD reached a fresh three-week high early in the session, as the US Dollar retained its broad weakness. The data published by the ECB showed that negotiated wages rose 4.5% on a yearly basis in the fourth quarter, helping the Euro stay resilient against its rivals. Demand for the Euro, however, remains subdued with the pair still confined to a well-limited intraday range.

GBP/USD trades modestly higher on the day. While testifying before the Treasury Committee, BoE Governor Bailey reiterated that they are looking for more sustained progress on reduction of more persistent elements of inflation. Fed minutes on Wednesday should provide some direction for the pair.

USD/CAD is up small on the day after Canadian CPI was released. Inflation in Canada softened to 2.9% on a yearly basis in January from 3.4% in December, Statistics Canada reported on Tuesday. This reading came in below the market expectation of 3.3%. On a monthly basis, the CPI was unchanged, compared to analysts' estimate for an increase of 0.4%.