European markets rallied Tuesday as U.S. inflation figures came in lower than forecast.
European markets
The pan-European Stoxx 600 closed 1.1% higher provisionally, trimming earlier gains of up to 2.2%. Technology stocks rose 3.1% as all sectors and major bourses climbed.
The British pound and euro both gained around 1% against the dollar, with sterling hitting a six-month high of 1.242 against the greenback shortly after the announcement. The euro also reached a six-month high of 1.0659.
U.S. inflation for November was recorded at 7.1% annually, versus a Dow Jones estimate of 7.3%. It was down from an annual gain of 7.7% in October.
The consumer price index, which measures a wide basket of goods and services, rose 0.1% on the previous month, below an estimate of 0.3%.
U.S. stocks also moved higher and the 10-year Treasury yield fell below 3.5% after the reading came in.
Jane Foley, head of FX strategy at Rabobank, said the softer than expected print had focused attention on how U.S. Federal Reserve policy will evolve next year, but not changed expectations of a 50 basis point rate hike being announced at its meeting Wednesday.
"The softer data will strengthen the likelihood that inflation is also in the process of peaking in the Eurozone and the UK, although there are different dynamics at play and, in any case, it is likely to be some months before central banks reach peak rates in either the US, EZ or UK," she said.
Thursday will also see monetary policy decisions from the Bank of England, European Central Bank and the Swiss National Bank.