The market has prepared in a big way for the Federal Reserve rate decision on 18 March after the US jobs data, with the dollar rallying sharply and dollar-denominated assets like gold and crude oil slumping.
There has been some reversal in currencies over Monday and Tuesday, also helped by slightly hawkish data from eurozone and confident rhetoric from the European Central Bank President Mario Draghi.
Eurozone core CPI index rose 0.7% from a year earlier in February compared to the previous reading of 0.6% growth, which analysts had been expecting to repeat. There was also a boost from the March ZEW survey, the region's economic sentiment index, which improved to 62.4 from 52.7; the market was expecting 58.9.
Draghi said on Monday that an economic recovery is taking hold in the eurozone helped by the bank's stimulus moves. He also urged governments to use the brighter outlook to advance reforms as it would improve the region's long-term growth prospects.
US non-farm employers added 295,000 jobs in February, up from 239,000 in January and beating market expectations of 240,000. The unemployment rate has fallen to a near 7-year low of 5.5% too.
The Dallas Fed President Richard Fisher said after two days that the US should start hiking interest rates soon.
Against the euro, the dollar had rallied as much as 5.1% since the big US data surprise, taking the dollar index to a 12-year high of 100.40 before dropping a few points this week. The pair is still down 3.5%.
The USD index was up 4.6% at last Friday's 12-year high and is still up 3.5% after this week's losses.
Gold and crude oil had been largely keeping the downward bias despite the dollar gains this week. From the day of US jobs data, the yellow metal is down 4.5% and brent for spot delivery is down as much as 13%.
With the weekly jobless data that came after the February non-farm payrolls also surprising on the positive side, the market has more reasons to bet for an increasingly hawkish bias at Wednesday's Fed review.
The US housing market data on Tuesday largely a mixed set, there is nothing to add to the sentiment from the calendar with just one day to go for the Fed meet.
In February, housing starts in the US declined to 0.897 million from 1.081 million in January when the consensus was for a marginal drop to 1.049 million. However, building permits increased to 1.092 million from 1.060 million beating market expectations of 1.065 million.
US Treasury Secretary Jack Lew will speak at a function later in the day and his comments might prove crucial given the significant buildup in various assets ahead of the FOMC meeting.