The euro was 0.3 percent from the highest level in eight weeks before Italy sells debt amid speculation the European Central Bank is preparing a bond-buying program that may cap borrowing costs for countries in the region. Italy is scheduled to sell six-month bills today and as much as 7.5 billion euros ($9.4 billion) in bonds tomorrow.

The 17-nation currency headed for gains versus most of its major counterparts this month after yields more than halved at an auction of Spanish bills yesterday. German Chancellor Angela Merkel will host Italian Prime Minister Mario Monti in Berlin today. ECB President Mario Draghi canceled his trip this week to the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, to prepare for the Frankfurt-based bank’s next meeting.

The Australian dollar weakened after the statistics bureau said construction work completed in the three months through June fell 0.2 percent after climbing a revised 7.8 percent in the previous period.

EUR/USD: during the Asian session, the pair traded in the range of $1.2550-70.

GBP/USD: during the Asian session, the pair traded in the range of $1.5810-50.

USD/JPY: during the Asian session, the pair traded around Y78.50.

Wednesday sees the August flash HICP data from Germany. HICP inflation for July was revised down below 2%, the first time inflation has been below the ECB's 2% target for two years. At 1015GMT, German chancellor Angela Merkel and Italian Prime Minister Mario Monti are due to brief the press after a bi-lateral meeting, in Berlin. US data for Wednesday starts at 1100GMT with the weekly MBA Mortgage Application Index, which is followed at 1230GMT when secondquarter GDP is expected to be revised up to a 1.7% rate from the 1.5%advance estimate, with only minor revisions to the key categories. The chain price index is expected to be unrevised at a 1.6% rise. Further US data sees the 1400GMT release of NAR Pending Home Sales and the weekly EIA Crude Oil Stocks data at 1430GMT.