European session review: USD appreciates ahead of U.S. inflation data

USD strengthened against its major rivals in the European session on Wednesday, as investors awaited the U.S. CPI data due later today (13:30 GMT), which are expected to show a slight acceleration in a consumer price increase in February. 

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, rose 0.11% to 92.06.

Meanwhile, the U.S. Treasury yields declined, following the first auction this week of a total of $120 billion in new government debt, which revealed a solid overall demand for 3-year Treasuries. The 10-year Treasury traded at 1.567% on Wednesday, down 3 basis points from 1.596% at Tuesday's close. But market participants worry that the yields could spike in case of weak demand in the 10-year auction later today or 30-year auction tomorrow.

The U.S. dollar index has closely tracked climbs in U.S. Treasury yields in recent weeks, both because higher yields heighten the currency’s appeal and as the turmoil in the bond market shakes investor confidence, bolstering demand for the safest assets.

The U.S. currency was also supported by the OECD's newly-released estimates for the U.S. economy, which now suggest that the world's biggest economy will grow 6.5% in 2021.