Early on Wednesday in the European trading session, the greenback dipped slightly, giving up some of its significant overnight gains that were sparked by ongoing worries about possible recession and the stability of the US financial system.

The dollar index that gauges the US dollar versus its major pairs slumped by 0.3% at 101.330, post recording 0.5% gain during the earlier session.

EUR/USD soared by 0.3% to 1.1008, trading back over the 1.10 mark following the publication of the German GfK consumer sentiment index for May, which came in at -25.7, a recovery from the previously reported reading of -29.3 and the seventh consecutive increase.

GBP/USD ticked up by 0.3% to 1.2440, since the market is anticipating a further 25 basis point increase in interest rates from the Bank of England next month.

USD/JPY plunged by 0.1% at 133.61, the attention now being on the inflation figures from Tokyo and the BOJ meeting on Friday for additional hints about the Japanese economy.