The US dollar fell Tuesday amid uncertainty over Trump's tariffs policy, but remained near two-year highs ahead of the release of the first of the week's key inflation data.

At 04:15 ET (09:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower to 109.325, after climbing to a 26-month high on Monday.

The dollar slipped from its highs Tuesday following a Bloomberg report that suggested the Trump administration could take a gradual approach to tariffs.

The Federal Reserve cut the number of rate cuts projected for 2025 to two at its December meeting, from four in September, with policy members fretting about inflation remaining above target.

The focus this week is now on the US consumer inflation report due on Wednesday, preceded by producer prices later this session.

In Europe, GBP/USD traded 0.1% higher to 1.2214, after falling to 1.21 on Monday, its lowest since November 2023.

The pound has struggled this year as surging gilt yields, and thus higher borrowing costs, have prompted fears that the new Labour government may be forced to rein in spending or raise taxes to meet its fiscal rules, potentially weighing on future growth.

There is an abundance of UK economic data to study this week, starting on Wednesday with the latest consumer prices.

EUR/USD rose 0.1% to 1.0255, just above hovered near the more than two-year low of 1.0177 seen on Monday.

The single currency has struggled at the start of the year after dropping more than 6% in 2024 as investors fret about the weak economic growth in the region and tariff threats.

There is sentiment data due later in the session from both Germany and the eurozone to digest.

The European Central Bank widely expected to ease interest rates by around 100 basis points in 2025, with most of the cuts coming in the first half of the year.

Source: Investing.com