Euro fell in European trade against dollar for second session, touching two-week lows ahead of the Federal Reserve's first 2022 meeting.

EUR/USD fell 0.3% yo 1.1282, with an intraday high at 1.1327, after closing down 0.15% yesterday, plumbing two-week lows at 1.1290.

Euro lost 0.6% last week against dollar on renewed fears of policy divergence between Europe and the US.

The dollar index rose 0.2% on Tuesday, the second profit in a row against a basket of major rivals. 

Geopolitical tensions in Ukraine with Russia has renewed purchases of dollar as a safe haven, while investors await Fed's meeting later today, expected to offer clues on the future of policy this year.

The Fed is expected to get even more bullish than before, in turn widening the policy gap between Europe and the US and hurting euro's position further.

USD/JPY tilted higher in Asian trade off January 14 lows for another session away from December 2021 lows, following a spate of data from Japan and ahead of US data. 

As of 05:58 GMT, USD/JPY rose 0.14% to 113.80, with an intraday high at 113.98, and a low at 113.62.

Japan's manufacturing PMI rose barely to 54.6 from 54.3, revised from 54.2 in December. 

From the US, manufacturing PMI is expected down to 56.9 from 57.7, while the services PMI is expected down to 54.9 from 57.6. 

Sterling fell in European trade against dollar for the second session, marking two-week lows following weak data from the UK, cutting the chances of UK rate hikes in February.

GBP/USD fell 0.3% to 1.3558, the lowest since January 10, with an intraday high at 1.3602.

Sterling lost 0.1% yesterday, the fourth loss in five days as the dollar recovers against major rivals, while the pound fell 0.8% this week, on track for the first weekly loss in five on profit-taking.

UK retail sales fell 3.7% in December, passing estimates of a 0.6% drop, which is the steepest decline since January 2021.

Retail sales constitute 70% total local GDP, and the recent drop is a dire sign on the pace of UK economic recovery.

The Bank of England won't just rely on historically high inflation rates in the UK when considering rate hikes, it will also focus on the rate of economic recovery.

Sterling rose in European trade against dollar for second straight session on prospects of a rate hike in the UK following strong inflation data.

GBP/USD rose 0.2% to 1.3637, with an intraday low at 1.3604, after closing up 0.15% yesterday, the first profit in four days following strong consumer prices data in the UK.

The dollar index fell 0.1% on Thursday, the second straight session against a basket of major rivals. 

US 10-year treasury yields stopped spiking ahead of further data on rate hike prospects in the US in March.

In the UK, consumer prices rose 5.4% in December, the fastest such pace since March 1992, passing estimates of 5.2%, after rising 5.1% in November. 

The data increased inflationary pressures on UK policymakers and bolstered prospects of rates a hike in February.