The euro recovered from one-month lows against the dollar as inflation concerns re-emerged after yesterday’s strong Germany CPI report. Analysts believe the strong inflation reading in Germany has increased the risk that inflation figures in the euro zone will come in above expectations on Thursday.
Attention will fall on the dollar later with the release of ADP's U.S. private payrolls figures, particularly to give some indication of what to expect from official non-farm payrolls data on Friday.
"Consensus looks for the ADP figure to improve slightly from last month's 79,000 decline, and we suspect a positive outturn could see further support for the dollar," said Huw Worthington, strategist at Barclays Capital.
Elsewhere, the pound remained under pressure from Tuesday's dismal data on high street and housing market activity.