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Dollar Muted After U.S. Inflation Data; Fed Decision Awaited

The U.S. dollar showed muted trading against its key counterparts in the European session on Tuesday, after a data showed that U.S. consumer prices grew in line with forecasts in May. Investors focused on the two-day FOMC meeting beginning today that is expected to deliver an interest rate hike for the second time this year.

Data from the Labor Department showed another modest increase in consumer prices in the U.S. in the month of May.

The Labor Department said its consumer price index rose by 0.2 percent in May, matching the increase seen in April as well as economist estimates.

Excluding food and energy prices, core consumer prices still increased by 0.2 percent in May after inching up by 0.1 percent in April. The core price growth also matched expectations.

The Fed wraps up its two-day meeting on Wednesday, when it is widely expected to raise the federal funds rate by a quarter point to a range of 1.75% to 2%.

Investors focus on Fed Chair Jerome Powell's press conference for any hawkish signals on the path of future rate rises.

U.S. President Donald Trump and North Korean Leader Kim Jong Un had signed a historic deal that commits to work towards "the complete denuclearization of the Korean peninsula."

The U.S. and North Korea also committed to hold follow-on negotiations led by the Secretary of State Mike Pompeo and a relevant high-level North Korean official.

The currency was higher in the Asian session, amid optimistism over historic U.S-North Korea summit, which is aimed to end a nuclear standoff on the Korean peninsula.

The greenback climbed back to 1.3357 against the pound, from a low of 1.3418 seen at 4:30 am ET. This may be compared to a weekly high of 1.3342 set at 2:15 am ET. If the greenback rises further, 1.32 is likely seen as its next resistance level.

Data from the Office for National Statistics showed that the UK unemployment rate remained unchanged at the lowest level since 1975.

The ILO jobless rate remained at 4.2 percent in the three months ended April, but down from 4.6 percent a year ago. This was the joint lowest since 1975.

The greenback held steady against the euro, after having fallen to 1.1809 from a 4-day high of 1.1741 it touched in the Asian session. At yesterday's close, the pair was worth 1.1782.

Survey data from the Centre for European Economic Research or ZEW showed that German investor confidence declined more-than-expected in June to its lowest level in over five-and-a-half years.

The ZEW Indicator of Economic Sentiment for Germany shed 7.9 points in June to stand at minus 16.1 points, the Mannheim-based think tank said. Economists had expected a score of -14.

The greenback was trading higher at 110.28 against the yen, not far from near a 3-week peak of 110.49 fetched in the Asian session. The pair was valued at 110.03 when it closed deals on Monday.

Data from the Ministry of Economy, Trade and Industry showed that Japan's tertiary activity index increased in April after falling in the previous month.

The tertiary activity index climbed 1.4 percent month-over-month in April, reversing a 0.3 percent decrease in March.

The greenback fell to a 4-day low of 0.9830 against the franc, from an early 4-day high of 0.9884, and held steady thereafter. The greenback-franc pair ended yesterday's trading at 0.9853.

The U.S. monthly budget statement for May is scheduled for release at 2:00 pm ET.

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