The dollar recovered modestly after slumping to seven-month lows against the euro yesterday, while the pound fell following much weaker-than-expected UK inflation data this morning The dollar fell sharply yesterday after Tuesday night's minutes to the latest meeting of US rate-setters suggested that interest rates could peak very soon, with above-forecast US inflation data yesterday afternoon failing to provide much support Today has seen the dollar recover some of those losses, though analysts believe the currency looks set to remain weak, particularly amid record high oil prices, ongoing tensions between the US and Iran and increasing concerns about the level of the US current account deficit "The dollar's inability to benefit (from yesterday's stronger-than-expected CPI data) is notable, and suggests there is more to recent dollar weakness than simply the adjustment in Fed expectations," said UBS currency analyst Daniel Katzive Oil prices and worries over Iran are certainly dollar-negative factors, but the dollar's recent woes may suggest that US structural concerns are once more returning to the fore, he said "A more compelling argument (explaining dollar weakness) is that concerns about US ability to fund its growing external imbalance are on the rise again as the Fed nears the end of its tightening cycle and G7 policy makers step up their focus on the topic ahead of this week's G7 and IMF meetings," he said Meanwhile, the pound fell sharply after data out this morning showed UK annual CPI inflation was just 1.8 pct in March, well below analysts' expectations for a reading of around 2.0 pct and the lowest level in over a year The rate is now below the Bank of England's 2.0 pct target rate and may reignite speculation that UK rate-setters could cut interest rates later this year "The benign behaviour of core inflation combines with the recent softer economic activity data to suggest new impetus to the doves on the MPC," said Henrik Gullberg at CALYON However, the BoE will remain concerned about the recent rises in fuel prices and utility bills, and rates are therefore likely to remain firmly on hold for the next few months, he said In the euro zone, figures out this morning showing annual CPI inflation dipping slightly to 2.2 pct, as expected, but core inflation unexpectedly rising to 1.3 pct year-on-year The headline rate remains above the European Central Bank's target of at or just below 2.0 pct and suggests that euro zone interest rates will continue to rise. Attention this afternoon meanwhile will turn to US weekly jobless claims numbers and the latest Philly Fed survey on manufacturing activity in the Philadelphia region