The US dollar sank like a stone against the euro after official figure showed inflation in the US hit 1.7 per cent in July, against expectations of 1.8 per cent.
The dollar fell 0.3 per cent against the euro to €0.8473 as the figures, from the Bureau of Labour Statistics, showed the consumer prices index (CPI) had edged up just 0.1 per cent between June and July, against forecasts of 0.2 per cent.
The pound climbed to $1.2993 against the dollar, 0.1 per cent higher, on the news.
Gold futures climbed 0.5 per cent to $1,296, a session high, while bitcoin, which has fallen in recent days, rose three per cent to $3,527, as investors piled into safe haven assets.
The news came shortly after Donald Trump had ramped up his rhetoric on North Korea even further, saying the US military was "locked and loaded", causing investors to flock to safe havens such as gold.
"The CPI data was very muted and not something which the Fed is going to be happy to look it," said Naeem Aslam, chief market analyst at Think Markets.
"The next Fed rate move is under question and inflation equation is going to help the doves on the committee. If you look at the gold price after the CPI data, it tells you that the Fed is not going to be in any rush to increase the interest rate this year. Perhaps we are done with the interest rate for this year. "