It was finally answered that price pressure in the United States continued to show a reduction in December, thus strengthening expectations for the Federal Reserve (Fed) to slow its rate of increase.
The annual consumer price index (CPI) met expectations by rising 6.5% last month, down from 7.1% recorded in November.
On a monthly basis, the CPI is also in line with market projections showing a contraction of 0.1% from an increase of 0.1% in the previous month.
Central bank policymakers welcomed the results, with Philadelphia Fed President Patrick Harker saying that a devastating spike in inflation may be over.
He also said the sizeable rate hikes are over, and it's time to move to a 25 basis point hike.
This in turn prompted the market to place expectations for a 25 basis point increase in interest rates at the policy meeting scheduled to take place in early February.
As a result, the greenback plunged lower following the statement and the subsequent release of inflation data drove most major currencies higher.
The euro surged to a nearly 9-month high at around 1.08515, while the pound sterling strengthened to a 3-week high of 1.2211 against the US dollar.
For pound investors, UK gross domestic product (GDP) data will be released in the European session today which is expected to point to a contraction in November.
The yen traded stronger, rocketing to a more than 6-month high of 128.90 against the US dollar.
On the other hand, the Aussie dollar also strengthened to a 5-month high while the New Zealand dollar was the strongest in 3 weeks against the greenback.
