USD weakened against most of its major rivals in the European session on Tuesday amid renewed investors' anxiety over the prospects of acceleration in inflation amid the post-pandemic recovery.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.16% to 90.07, its lowest level in two-and-a-half months.

The fear among market participants is that higher price pressures will prompt the U.S. central bank to hike its interest rates and start tapering monthly asset purchases sooner than expected. The U.S. Federal Reserve representatives, however, have tried to assure markets that any spike in inflation would be transitory. 

Investors are looking for the Consumer Price Index (CPI) for April, set to be released on Wednesday, to see whether inflationary pressure was building. It is expected that CPI will show a y-o-y climb of 3.6%, due to a low base from pandemic-depressed prices.