Some improvement in net capital flows should underpin the dollar despite the very fragile economic conditions.

The Euro strengthened to highs above 1.58 against the dollar in early Europe on Tuesday, but failed to sustain the gains.

The US data was generally frail on Tuesday, but offered some slight encouragement over future trends. Consumer confidence weakened to 57.2 in May from 62.8 the previous month which was a fresh 16-year low as expectations also remained depressed for the month. The inflation fears were illustrated by a further sharp increase in inflation expectations.

The Case-Shiller house-price index also recorded a 14.4% decline in the year to March. US new home sales rose to 526,000 in April from a downwardly-revised 509,000 previously. There was a significant drop in inventories while prices also rose. Any perception that sales have reached a trough would be likely to spur additional buying support for housing.

Regional Fed Governor Yellen was positive over the second-half growth outlook as the fiscal and monetary stimulus to effect.

The Euro again struggled to sustain gains on Wednesday with dollar support close to 1.5760.