Inflation in the US, as measured by the change in the Consumer Price Index, rose to 3.2% on a yearly basis in February from 3.1% in January, the US Bureau of Labor Statistics (BLS) reported on Tuesday. Annual Core CPI, which excludes volatile food and energy prices, increased 3.8% in the same period, below the January increase of 3.9% but above the market forecast of 3.7%. These numbers are stronger than expected and will put even more pressure on the Fed regarding policy outlook. Regarding the policy outlook, Powell had reiterated that it will likely be appropriate to begin lowering the policy rate at some point this year but added that they would like to have greater confidence inflation will move sustainably toward 2% before acting. Today's print will certainly muddy the waters.

EUR/USD is relatively flat to start the session. The US Dollar Index edged slightly higher with the immediate reaction and was last seen rising 0.08% on the day. The cautious market mood at the beginning of the week helped the USD stay resilient against its rivals and forced EUR/USD to stay on the back foot. Although the data from the US is strong it really did not provide much of a boost to start the day.

GBP/USD is lower on the day after weak employment data was released in the UK. The unemployment rate increased to 3.9%, employers fired 21K workers, and Average Earnings grew at a slower pace in the three months ending January. The labor market data clearly demonstrates uncertainty over the economic outlook which could force BoE policymakers to start reducing interest rates earlier than previously expected.

USD/CAD is a bit softer on the day after the US CPI figures. The Bank of Canada held interest rate unchanged at 5.0% for the fifth consecutive meeting last week, as widely expected. BoC governor Tiff Macklem said during a press conference that it’s premature to cut interest rates until there’s more progress in taming core inflation. He further stated that the central bank needs to give higher rates more time to do its work. Money markets have pushed back bets for a fully priced in rate cut to July from June.