The US dollar weakened after data showed the US retail sales growth came in less than expected, supporting the side who speculate the world's largest economy will take longer than earlier expected to return to its inflation target.
The USD index fell off a 1-month high and traded at a three-day low while EUR/USD moved off a one-month low to a three-day high. Gold and silver moved off multi-week lows but could rise above the previous day's close.
The retail sales grew 0.9% on a monthly basis in March, making a strong rebound from 0.5% fall in February but as the market had priced in a 1.1% rise, the data pulled the greenback down.
The PPI ex food and energy growth surprised on the positive side with a 0.2% rise on month in March from 0.5% fall in February compared to the consensus of 0.1% growth, but the number failed to prevent the dollar downside.
The dollar index dropped to 98.79 from the previous close of 99.52, and further away from Monday's peak of 99.99, which was its highest since 16 March.
The move of the index over the past few days had strengthened a view that it will overtake the last month's 12-year high of 100.40 but the sales data has now weakened that view.
The US targets an annual inflation of 2% which it has failed tot match for more than two years now. Many policymakers argue that the Fed should not shift to a tightening cycle until inflation is back to target.
Others, meanwhile, show the steady GDP growth path and strong labour market indicators and support a rate increase. The comments of the Chair Janet Yellen also supported such a view, and for investors, every data point from the US is now an indicator pointing to the timing of the first Fed rate hike since 2006.
The Minneapolis Fed President Narayana Kocherlakota said last week that the FOMC can remain patient on rates given that the country has not met its price rise target for this long. "I expect that it will take several years for inflation to return to target," Kocherlakota said.
The Commerce Department's personal consumption expenditure price index, which is the Fed's preferred inflation gauge for policy purpose, rose 0.3% in February from a year earlier.
EUR/USD rebounded from day's low of 1.0531, which had almost matched Monday's one-month low of 1.0520, and rose to as high as 1.0686 after the US sales data.
Gold bounced off the day's low of $1183, which was a two-week low, and traded at $1197.71, just a shade below Monday's close. Silver moved off 15.96, a one-month low it hit earlier in the day, and traded as high as 16.22, almost reversing the entire losses of the day.