The Dollar retreated on Tuesday as a lower US consumer confidence and declining home prices raised doubts about the Federal Reserve's ability to hike interest rates to stem inflation. The dollar struggled as the Fed began a two-day monetary policy meeting on Tuesday, with analysts expecting the US central bank to hold interest rates steady at 2%. But traders will pore over the Fed's accompanying statement for clues about possible hikes later in the year.

Analysts said if the Fed uses more neutral language on the balance of risks between inflation and growth in its post-meeting policy statement on Wednesday Dollar losses will accelerate. Analysts also said the U.S. economy's continued weakness should ease markets' expectations for rate increases this year.

US short-term interest rate futures trimmed the chances of a rate hike in August to 70% from 74% after the confidence data, and analysts said that could slide further if the economy continues to show weakness.

EurUsd hit yesterday a session high of 1.5622 after US Consumer Confidence sank to a 16-year low in June. EurUsd closed 0.34% to 1.5575. UsdJpy fell 0.06% to 107.82 from session lows at 107.36. UsdChf fell 0.41% to 1.0409, with the CHF benefiting from market talk that UBS was a takeover target for HSBC. GbpUsd rose 0.33% to 1.9709.