The US Dollar reversed Monday's gains against the Sterling and Euro yet held on to some advances against the Japanese Yen on Tuesday ahead of US inflation data coming out on Wednesday.

The Pound rose 0.5% to trade at $1.2439, whilst the Euro was up 0.4% at $1.0903, as the majority of European markets returned from the Easter break. 

Over the Easter holiday, both currencies had declined from their highs earlier in the month after resilient US labour market data published last Friday boosted the case for a Fed rate rise in May and also eased concerns about a steeper slowdown in the US economy, Reuters reports.

"The Fed's early May meeting is beginning to loom, and the data on the way to that is very much the focus," said the head of FX strategy at Rabobank, Jane Foley.

She added that the Euro's move away from $1.09 would be dependent on the upcoming data and what it indicated for US interest rates.

"Bank earnings will also be important, they don't often reach across to FX markets directly, but they might given the recent jitters," Foley went on to say.

The moves on Tuesday were also impacted by the reopening of European markets, according to the head of FX analysis at Monex Europe, Simon Harvey, considering the limited liquidity on Friday and Monday whilst markets were closed.

European bond yields enjoyed a steep increase on Tuesday, following the Easter break. 

"There's just that catch-up effect flushing through," Harvey stated.

In addition, the greenback edged down against the Yen on Tuesday, falling 0.4% to 133.09, following Monday's 1.1% increase.

The Dollar also fell 0.58% against the Swiss Franc to 0.9042, as well as the Australian Dollar, with the Aussie rising 0.42% to $0.667.