The dollar index headed toward a flat close on Tuesday after weaker-than-expected U.S. February data triggered safe-haven flows on the possibility that the recent run of unexpectedly strong economic numbers could prove anomalous.
The mild risk aversion eroded EUR/USD's early gains from above-forecast French and Spanish inflation, which had lifted bund-UST yields spreads.
Treasury yields and the dollar briefly dipped after February consumer confidence fell to 102.9 from 106 versus 108.5 forecast nL1N35722H.
Adding to the pullback was 12-month inflation expectations retreating to 6.3% from 6.7%.
Further raising concerns that February might be something of a bearish mirror image of unexpectedly febrile January data, Chicago PMI came in at 43.6 from 44.3 and 45 forecast.
There's some concern January's U.S. data was flattered by one-off statistical issues.
February ISM manufacturing and non-manufacturing reports out on Wednesday and Friday will test that theory.
Were they to undershoot already mediocre forecasts, more risk-off flows could ensue given the Fed is priced to hike rates to 5.4% by July with less than a single 25bp rate cut before year-end.
The ECB is priced to hike rates by 150bp to 3.82% by year-end, which might yet be below the euro zone inflation rate that was at 8.6% in January.
EUR/USD fell to flat after earlier gains briefly brought it to 1.06455 on EBS by its falling 10-day moving average.
February's lows have so far found support by the daily cloud base that rises to 1.0575 on Wednesday.
USD/JPY fell 0.33% and broke below 136.00 after making a new trend high earlier at 136.92 on EBS.
data doubts about how much further Fed hikes can be priced and month-end pruning of popular short yen trades pre-ISMs weighed.
Sterling extended Monday's Irish protocol deal gains before trimming them in late risk-off trading.
Canada's big Q4 GDP miss nL1N35816C lifted USD/CAD 0.28%.
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