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Euro zone annual inflation rose to 3.6% in March, revised up from 3.5% estimated earlier, the Eurostat indicated today. Annual inflation increased from 3.3% recorded in February. Monthly inflation stood at 1% in March.

Annual inflation continued to stay well above the central bank target. The central bank aims to keep inflation rates “below, but close to, 2% over the medium term”.

Against the other major currencies, the dollar weakened after hitting multi-day highs in early Asian trading.

Markets will receive important inflation data today with the release of the U.S. CPI report for March, along with U.S. housing starts for the same month. The Federal Reserve will release its Beige Book later in the day.

Month-over-month core CPI is expected to increase 0.2% following a previous flat reading while annualized core CPI is expected to gain 2.4% after increasing 2.3% in February. Looking at the headline, the index is expected to be up 0.3% following no increase in February, and the annualized rate is expected to rise 4.0% following February`s 4.0% rise.

Federal Reserve officials are scheduled to speak around mid-day today. At 11:30 am ET, San Francisco Federal Reserve Bank President Janet Yellen will speak on the U.S. economic outlook at the Bay Area Council Conference in Alameda, California. At 12:30 pm ET, Philadelphia Federal Reserve Bank President Charles Plosser will speak about education in Blue Bell, Pennsylvania.

Against the pound, the dollar touched 1.9809 by about 5:45 am ET Wednesday, dropping from a 26-day high of 1.9603 hit in day`s early Asian deals. The pound-dollar pair closed yesterday`s deals at 1.9628.

The dollar equaled 100.92 against the yen by about 5:50 am ET Wednesday, moving down from a 5-day high of 101.94 hit at about 6:25 pm ET. The dollar-yen pair closed Tuesday`s deals at 101.84. If the dollar weakens further, it may test support around the 100.3 level.

Against its Swiss counterpart, the greenback spiked to 1-week high of 1.0113 by about 6:20 pm ET, Tuesday. But the pair lost momentum thereafter and hit as low as 0.9943 by about 5:50 am ET, compared to yesterday`s New York session closing value of 1.0067.

During early deals on Wednesday, the dollar plunged to a new record low of 1.5968 against euro by about 5:50 am ET. The euro-dollar pair closed Tuesday`s New York session trading at 1.5791.

In economic news, German annual inflation stood at 3.1% in March, unrevised from the preliminary estimate and up from 2.8% recorded in February.

The statistical office said, “The year-on-year rate of price increase again exceeded the 3% threshold for the first time since December 2007.” The dollar soared yesterday as traders considered data showing US producer prices came in much better than expected in March, rising 1.1%. Core PPI was up 0.2%, as expected.

Additionally, manufacturing in New York unexpectedly showed growth in April, according to the New York Federal Reserve`s manufacturing index. The report showed that the general business conditions index rose to a positive 0.6 in April from a negative 22.2 in March, while economists had expected the index to come in at a negative 16.

Concerns over the health of the economy were eased by the data, as investors hoped that the worst of the economy`s troubles are over.

Since it began easing its monetary policy, the Fed has lowered its rate by a cumulative 300 basis points while the ECB has maintained the euro zone`s rate since June.

Core producer prices, which exclude the volatile food and energy sectors, are projected to rise by 0.2%. This would represent a slowdown compared to the previous months reading of a 0.5% increase.

In February, the overall PPI rose 0.3 percent, while the Core PPI jumped 0.5 percent. Economists expect the overall PPI to jump 0.5 percent in March and the Core PPI to moderate to a 0.2 percent increase.

Additionally, the New York Fed will release the results of its survey of manufacturers in New York State. The manufacturing index continued to show a contraction in March, falling to a minus 22.2. While the index is expected to remain negative in April, it is expected to increase a bit to a minus 16.0.

The dollar was little changed against the euro Tuesday morning, bouncing back and forth between 1.58 and 1.5850 in early dealing. The buck hovered near last week`s record low of 1.5912.

German economic sentiment dropped 8.7 points to minus 40.7 in April, a monthly survey by the Center for European Economic Research, or ZEW, indicated Tuesday. Economists were looking for a reading of minus 30. The indicator stayed well below its historical average of 30 points.

The report added that economic expectations were affected by the extraordinary high price pressure in Germany this month. ZEW President, Wolfgang Franz stated “A growth rate for Germany of 1.7 percent this year is still realistic.`

The greenback moved roughly sideways versus the yen for a second day, fetching 101 approaching mid-morning in New York. The dollar has steadied since falling to a 12-year low of 95.70 last month.

The dollar again challenged a monthly high versus the sterling but pulled back in early morning dealing on Tuesday. The buck rose to 1.9655 by 5 am ET, then slipped back a bit to 1.97. A move to 1.9647 would bring the buck to its highest level since February 26.

G7 officials will gather in Washington on Friday in a bid to stave off what the International Monetary Fund warned earlier this week was the worst financial crisis since the 1930s Great Depression. Traders will be looking for any mention of US dollar weakness in the communique.

At 8:30 am ET, data on import and export prices for the month of March will be made public. In February, export prices ticked up at a rate of 0.5 percent, and import prices increased at a rate of 0.6 percent.

At 10:00 am ET, data on consumer sentiment from the first two weeks of April will be made public. Analysts expect sentiment, which is already to come in at 69.0 following March`s reading of 69.5.

The dollar moved back towards yesterday`s record low of 1.5912 versus the euro on Friday, slipping to 1.5850 before finding its footing approaching mid-morning. Traders continued to react to Thursday`s hawkish rhetoric from European Central Bank President Jean-Claude Trichet in his remarks accompanying the ECB`s decision to maintain its 4 percent interest rate.

German wholesale prices rose faster than expected in March. A report from the Federal Statistical Office or Destatis showed Friday that the wholesale price index climbed 7.1% year-on-year in March. Economists were looking for a rise of 6%.

The dollar fell versus the yen Friday morning in New York amid the release of disappointing quarterly results from bellwether General Electric. The dollar slipped to 101.34 from an early level near 102. The pair experienced wild trading on Thursday, with the dollar dropping to a weekly low of near 100 before storming back to the upside.