The dollar is currently trading mixed as the conclusion of the 2-day FOMC meeting draws near. The U.S. currency is declining against the Euro, but is gaining ground against both the pound sterling and the Japanese Yen. Investors are hoping that the Fed and its Chairman Ben Bernanke will give a clear indication of when stimulus tapering will begin.
After reporting decreases in consumer prices in each of the two previous months, the Labor Department released a report on Tuesday showing a modest increase in prices in the month of May.
The Labor Department said its consumer price index inched up by 0.1 percent in May after falling by 0.4 percent in April and dipping by 0.2 percent in March. Economists had been expecting the index to edge up by 0.2 percent.
New residential construction in the U.S. showed a significant rebound in the month of May, according to a report released by the Commerce Department on Tuesday, although housing starts still came in well below economist estimates.
The report said housing starts climbed 6.8 percent to a seasonally adjusted annual rate of 914,000 in May from the revised April estimate of 856,000. The increase in housing starts came following a 14.8 percent drop in the previous month.
However, economists had been expecting housing starts to surge up to an annual rate of 955,000 compared to the 853,000 originally reported for April.
Meanwhile, the Commerce Department also said building permits, an indicator of future housing demand, fell 3.1 percent to an annual rate of 974,000 in May from the revised April rate of 1.005 million. The drop in permits, which followed a 12.9 percent jump in April, came roughly in line with expectations.
European Central Bank President Mario Draghi said on Tuesday that the central bank has not ruled out the possibility of negative deposit rates and other non-standard policy measures in the euro area.
Speaking at the farewell conference for Bank of Israel Governor Stanley Fischer in Jerusalem, Draghi said, "We will look with an open mind at these measures that are especially effective in our institutional setup and that fall within our mandate."
He also reiterated the warning that some of the non-standard measures could lead to unintended consequences. "This does not mean that they should not be used, but it does mean that we need to be aware of those consequences and manage them appropriately," the ECB official added.
The dollar rose to an early high of $1.3325 against the Euro Tuesday, but has since pulled back to a 4-month low of $1.3415.
Germany's investor confidence increased more-than-expected in June after staying broadly unchanged in the previous month, signaling the prospects for a further pick up in the recovery that started at the beginning of the year.
Data from a survey conducted by the Centre for European Economic Research/ZEW showed Tuesday that the Indicator of Economic Sentiment climbed to a three-month high of 38.5 from 36.4 in May. Economists had forecast a more modest rise to 38.1.
The greenback climbed to a high of $1.5564 against the pound sterling Tuesday, but has since eased back to around $1.5625.
U.K. consumer price inflation rose more than expected in May, largely driven by the previous month's steep increase in air-fares, smaller decrease in fuel costs and a rise in clothing prices, a report from the Office for National Statistics showed Tuesday.
The rate of inflation rose to 2.7 percent in May from 2.4 percent in April. Economists expected an increase to 2.6 percent. This confirms that April's drop from 2.8 percent in March was mainly due to the timing of Easter last year.
The buck rose to a high of Y95.755 against the Japanese Yen on Tuesday, but has since retreated to around Y95.265.
Japan's industrial production grew less than previously estimated in April, final data from the Ministry of Trade and Industry showed Tuesday. Industrial production rose 0.9 percent month-on-month in April, revised from a 1.7 percent growth reported in the preliminary report. In March too, production recorded a monthly growth of 0.9 percent.
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