The US dollar slumped against major currencies on Wednesday as investors awaited the latest US inflation data while the British pound reached a 15-month high against the greenback. The dollar index which measures the currency's value against six major peers fell 0.24% to 89.831 as of 10:50 AM ET (15:50 GMT).
Investors are closely watching the US inflation data with expectations for consumer prices to have increased by 3.6% in April from a year ago which would be the fastest pace since 2011. A sharp rise in inflation could fuel concerns that the Federal Reserve may have to tighten its ultra-loose monetary policy sooner than expected supporting the case for a stronger dollar.
Meanwhile the British pound surged to its highest level against the dollar since February 2020 reaching $1.42. The sterling has been supported by expectations of a strong economic recovery in the UK as lockdown measures ease and the successful vaccine rollout continues.
The euro also gained ground against the dollar rising 0.3% to $1.2157. The European Central Bank's more dovish stance compared to the Federal Reserve has been weighing on the euro in recent weeks but the latest weakness in the dollar helped the single currency bounce back.
Elsewhere the Japanese yen edged higher against the dollar with USD/JPY falling 0.2% to 108.85. The safe-haven yen tends to benefit in times of market uncertainty but its gains have been limited by the overall weakness in the dollar.
In other news the Australian dollar traded near its highest level in more than two months against the dollar as stronger commodity prices and the improved global economic outlook boosted demand for the currency. The AUD/USD pair rose to 0.7855 its highest level since February 25.
The Canadian dollar also strengthened against its US counterpart with USD/CAD falling 0.2% to 1.2041. The loonie has been supported by rising oil prices Canada's main export.
In the cryptocurrency market Bitcoin held steady above the $55000 level while Ethereum extended gains to trade above $4000. The positive sentiment in the cryptocurrency market has been driven by increasing adoption from institutional investors and growing acceptance of digital currencies as a means of payment.
