Traders continued to divert their assets to safer currencies like the Dollar on Tuesday, following news that Chinese inflation rose at a higher then expected rate. As a result, investor concerns that China would soon raise interest rates caused the greenback to surge in afternoon trading.

As traders turned pessimistic about the global economic recovery, the Euro tanked against the Dollar. EUR/USD fell during most of the day, recovering slightly only after NY trading hours. The pair is currently trading at 1.2615, down from 1.2741 yesterday afternoon. While the Dollar was able to maintain gains against the Euro, sterling was able to capitalize on evening news that a new UK government has been formed. Consequently, GBP/USD rose throughout the day, peaking at 1.4987. The pair has since corrected itself and is currently trading at 1.4866.

Looking ahead to today's session, traders will want to pay attention to the U.S. Trade Balance Report, scheduled to be released at 12:30 GMT. The report, which tracks the difference between imported and exported goods, is considered a leading economic indicator, and consistently leads to market volatility. With a slight decrease over last month forecasted for today, the Dollar may see some losses if investors determine that the U.S. economic recovery is not moving as quickly as originally thought.