The US dollar made significant headway against commodity currencies on Tuesday while struggling to build any momentum against other major pairs.
The Australian dollar lost ground during the Asian session with slightly more dovish than expected Reserve Bank policy minutes. The central bank expects interest rates to remain at record lows for some time with weaker growth driven by slower mining-sector investment and a tighter fiscal policy.
Risk conditions were also relatively fragile during the session and there were further concerns surrounding iron-ore prices which unsettled the currency. AUD/USD dropped below the 0.9300 level and extended losses towards 0.9250 in Europe. USD/CAD moved to challenge resistance above 1.09 with a weaker than expected Canadian wholesale sales report also contributing to buying interest.
The latest UK headline consumer inflation data was slightly stronger than expected at 1.8% from 1.6% previously and this was the first increase since July 2013. There was an impact from the timing of Easter and underlying readings were generally benign with the producer-prices data weaker than expected reinforcing expectations that consumer inflation will stay under control.
GBP/USD pushed higher into the data and spiked after the release with a peak just above 1.6860 before retreating back towards 1.6820 on a more reflective view of the data.
The Euro came under pressure in Europe, undermined by selling on the main crosses. EUR/GBP dipped to fresh 16-month lows near 0.8120 and EUR/JPY also retreated back below 139.0. In this environment, EUR/USD dipped sharply to lows just below 1.3680 as players also looked to trip stop losses. There was solid support at lower levels with a recovery back to the 1.3700 area at the US open as USD/CHF attempted to hold above the 0.89 level and maintain a bullish bias.
There was some initial USD/JPY protection from a small increase in US bond yields with the pair edging back towards 101.50 early in New York. A reversal in bond markets also triggered dollar selling and there was a fresh attempt to break below the 200-day moving average at 101.25.