The Dollar fell against the Euro and was little changed against the Yen on Tuesday in a volatile session as investors debated the outlook for the US economy while anticipating a rate hike from the European Central Bank later this week.

The ECB is widely expected to raise interest rates by a 25bp to 4.25% on Thursday, bolstering demand for Euro-denominated assets. Markets have begun to take the view that the Federal Reserve has little scope to tighten U.S. monetary policy aggressively to fight inflation given the sluggish economy.

US stocks retraced earlier losses after General Motors reported stronger-than-expected June sales, keeping the Dollar off session lows. A rise in US factory activity also helped the Dollar. The Institute for Supply Management said its index of national factory activity rose in June to 50.2 from 49.6 in May after four straight months of contraction. In Europe, data showed euro zone manufacturing activity contracted for the first time in three years in June and output prices matched April's year high. But analysts said Tuesday's data will not prevent the ECB raising rates.

Yesterday, EurUsd rose 0.2% at 1.5791. UsdJpy traded 0.12% up at 106.18, well off the session low of 105.23. EurJpy gained 0.33% to 167.65. UsdChf was unchanged at 1.0208 recovering from intraday 1.0139 low. GbpUsd rose 0.06% to 1.9943 retracing from intraday 2.0007 high.