On mounting concerns that the interest rate trajectory is reaching the final of its tightening cycle, the U.S. dollar sank to a two-month low early on Tuesday in European trading, while sterling set a new 15-month high as salaries continue to soar.

The dollar index that gauges the greenback versus its major pairs dipped 0.2% to 101.405, slipping to level not seen in 2 months ago.

The dollar has declined after numerous Fed members stated on Monday that, although the central bank would probably still need to hike interest rates further to lower the inflation rate, the cycle of tightening its monetary policy is on the verge to end.

EUR/USD advanced by 0.2% to 1.1018, German inflation increased in June, going to 6.4% from 6.1% the previous month, interrupting a gradual reduction since the year's beginning, reaching to a two-month high.

GBP/USD added 0.4% to 1.2905, rising after the most recent job statistics from the UK revealed that average salaries increased by a record 7.3% in June, putting pressure on the Bank of England to continue raising interest rates given that UK inflation is already the highest in the G7.

USD/JPY slid 0.4% to 140.75, Yen prices sank further from a recent seven-month low as U.S. Treasury yields dropped further.