The US dollar has rallied ahead of the inauguration of Donald Trump, contributing to weakness in sterling and the euro. Bond yields on US Treasuries also rose.
The dollar index against a basket of other currencies rose as much as 0.6 per cent from its low point at the start of European trading.
The pound fell by 0.45 per cent in morning trading to trade at $1.2286 against the dollar, as it was simultaneously squeezed by reaction to weaker than expected retail sales data.
The euro, which is heavily weighted in the dollar index, fell by 0.19 per cent at the time of publication.
The dollar has sold off in recent weeks after coming off 14-year highs hit after the election of Trump under the so-called Trumpflation trade.
Bond yields on the benchmark US 10-year Treasury also rallied to break 2.5 per cent for the first time since early January.
Traders have seemingly taken some profits as the lack of detail around any policies promised on the campaign trail has started to make investors nervous.
The incoming President also added to the sell-off on Tuesday when he said in an interview with the Wall Street Journal that the dollar is “too strong” when compared to China’s renminbi, which he thinks gives it an unfair advantage over the US economy.
A stronger dollar means it is cheaper to import goods from other countries. Although this boosts living standards for the nation as a whole, who can buy cheaper goods, it can also have devastating consequences on the fortunes of US manufacturers making equivalent products, who cannot compete with the cheaper cost of labour.
The imposition of punitive tariffs on China was one of the central planks of Trump’s campaign, as he gained significantly from voters in regions with depressed manufacturing sectors.