Investing.com - The euro and sterling were near five-month lows on Wednesday after disappointing economic data while the U.S. dollar surged as investors look ahead to Fed meeting minutes later in the day.
The euro was near a five-month low after private sector growth in the euro zone fell to its slowest pace in 18 months in May.
The Flash Euro Zone Composite Output Index, which measures the combined output of both the manufacturing and service sectors, registered a reading of 54.1 this month, compared to expectations for a reading of 55.0.
The report is likely to push back expectations of an interest rate hike by the European Central Bank.
The euro was down, with EUR/USD falling 0.48% to 1.1724 as of 4:42 AM ET (8:42 GMT).
Meanwhile the pound slumped to new five month lows after data showed that annual inflation slowed in April, which could ease pressure on the Bank of England to increase interest rates.
GBP/USD dipped 0.53% to 1.3362.
Elsewhere the greenback rose to a five month high, as investors look ahead to the latest meeting minutes from the Federal Reserve. The minutes are set to be released at 2:00 PM ET (18:30 GMT).
Investors will be looking closely for any sign of tightening monetary policy.
A recent increase in bond yields, along with positive economic data and rising inflation, has boosted expectations that the Federal Reserve will increase interest rates and tighten monetary policy.
The Fed raised rates in March and is expected to raise rates twice more, with some investors expecting a third hike.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.28% to 93.77. Expectations of higher interest rates tend to boost the dollar by making the currency more attractive to yield-seeking investors.
The dollar was down against the safe haven yen, with USD/JPY falling 0.90% to 109.89.