Investing.com - The dollar remained broadly lower against a basket of other major currencies on Tuesday, despite upbeat U.S. consumer price inflation data as demand for the euro strengthened after strong manufacturing activity and service sector from the single currency bloc.
In a report, the U.S. Department of Labor said that consumer prices increased 0.2% last month, meeting forecasts and following a drop of 0.7% in January.
Year-over-year, consumer prices were flat in February, compared to expectations for decline of 0.1% and after falling 0.1% in January.
Core consumer prices, which exclude food and energy costs, increased by 0.2% in February, above expectations for a 0.1% increase and after a 0.2% gain in January.
The dollar remained under pressure amid uncertainty over the path of U.S. monetary policy after the Federal Reserve downgraded its forecasts for growth and inflation and lowered its interest rate projections last week.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.31% to 96.90.
EUR/USD gained 0.40% to 1.0988.
The euro strengthened after research group Markit earlier said that its composite purchasing managers index, which measures activity in the manufacturing and services sectors, rose to 46-month high of 54.1 in March from 53.3 in February.
The report showed that both new order growth and job creation rose at the fastest pace since mid-2007.
Germany’s private sector expanded at the fastest rate in eight months, but growth in France’s private sector eased this month.
The pound held steady, with GBP/USD at 1.4947.
In a report, the U.K. Office for National Statistics said the rate of consumer price inflation decelerated to 0.0% last month from 0.3% in January, compared to expectations for a 0.1% reading.
Bank of England Governor Mark Carney will now have to write an open letter to the Chancellor of the Exchequer, George Osborne, as inflation is more than a percentage point below the central bank's target of 2.0%.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at rate of 1.2% last month, down from 1.4% in January and below forecasts for a reading of 1.3%.
Elsewhere, the dollar remained lower against the yen and the Swiss franc, with USD/JPY shedding 0.28% to 119.37 and with USD/CHF dropping 0.97% to 0.9568.
The Australian, New Zealand and Canadian dollars were broadly stronger, with AUD/USD up 0.48% to 0.7918 and NZD/USD rising 0.25% to 0.7670, while USD/CAD retreated 0.57% to trade at 1.2450.