Investing.com - The dollar rallied over 1% against a basket of other major currencies on Tuesday, after data showed that U.S. building permits and housing starts soared past expectations last month.
The dollar was boosted after the U.S. Commerce Department said that the number of building permits issued last month increased by 10.1% last month to 1.143 million units from March's total of 1.038 million.
Analysts expected building permits to rise by 2.2% to 1.060 million units in March.
The report also showed that U.S. housing starts soared by 20.2% in April to hit 1.135 million units from March's total of 944,000 units, easily surpassing expectations for an increase of 9.9% to 1.019 million.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped 1.15% to 95.31, the highest level since May 11.
EUR/USD tumbled 1.46% to one-week lows of 1.1156 after senior European Central Bank policymaker Benoit Coeure said the central bank is planning to speed up the pace of its bond-buying stimulus program before the summer in order to avoid the "notably lower market liquidity" in late July and August.
Also Tuesday, the ZEW Centre for Economic Research said that its index of German economic sentiment fell to 41.9, the lowest level since December, from April's 53.3. Economists had expected a reading of 49.0.
Fears over the prospects of a Greek default also continued to pressure the single currency, even after the country’s labor minister said Tuesday that an agreement with its lenders on a cash-for-reforms deal would soon be reached.
The pound also pushed lower, with GBP/USD down 1.16% to a one-week trough of 1.5469 after data showed that the U.K. entered into negative inflation last month for the first time since 1960.
The U.K. Office for National Statistics said the annual rate of inflation dipped 0.1% in April after remaining unchanged in the previous two months. Economists had expected annual inflation to remain unchanged at zero.
Consumer prices rose just 0.2% from a month earlier the ONS said, compared to forecasts for an increase of 0.4% after a 0.2% increase in March.
Elsewhere, the dollar was higher against the yen and the Swiss franc, with USD/JPY up 0.33% to 120.38 and with USD/CHF gaining 0.97% to 0.9355.
The Australian and New Zealand dollars were weaker, with AUD/USD down 0.59% to 0.7942 and NZD/USD slipping 0.19% to 0.7377.
In the minutes of its May policy meeting, the Reserve Bank of Australia said it remained open to further rate cuts, due to the slowdown in China's economy and concerns over the Australian job market.
At the same time, the Reserve Bank of New Zealand said its inflation expectations for the next two years ticked up to 1.9% in the last quarter from 1.8% in the three months to December.
Meanwhile, USD/CAD rose 0.23% to trade at two-week highs of 1.2188.