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America’s dollar was spotted at an early session lead with markets unsettled by growing prospects of a messy Greek breakaway from the euro zone. Greece has been on financial life support for years and soon needs to tap the remaining slice of aid from its bailout program or risk going belly up and getting booted out of the euro. Adding to the euro’s slow start to the U.S. session, German investor morale darkened more than expected this month, hitting a seven-month low. Early session leads have been relatively easy to come by for the dollar. It’s sustaining them that has been the problem, given the still shaky ground the U.S. economy appears on. The U.S. central bank starts a two-day meeting today that will wrap up Wednesday and likely affirm what’s already baked into the dollar’s value: that U.S. interest rates are poised to head higher later this year. The Fed Wednesday should provide plenty to chew on for markets as in addition to its statement, due at 2 p.m. ET, it will also release fresh projections for the economy and Chair Janet Yellen will speak with the media. Sterling gained as U.K. inflation ticked up from record lows.

GBP

Sterling flirted with one-month highs after British inflation climbed above record weak levels and the lowest since the 1960s. As expected, consumer prices rose 0.1 percent in May from a brief stint below zero in April. The modest rise will offer a little relief to policymakers. Still, inflation has a long way to go to get back to central bankers’ target of 2 percent. Lots more risk events ahead of the pound this week with central bank minutes due Wednesday along with unemployment data and retail sales on Thursday. The pound is also sure to be impacted by the Fed’s decision Wednesday. Could a brush with $1.60 soon be on the cards for sterling? It would if the Fed Wednesday should offer little reason for traders to add to their bullish bets on the dollar.

EUR

The euro lost some of its resilience as mounting unease over Greece helped steer nervous investors toward alternative currencies like the pound. Sterling’s outperformance against the euro translated into gains against the dollar. Healthier U.K. inflation also buoyed the pound. Adding to the euro’s weaker tone, Germany’s ZEW index of investor optimism darkened more than expected to 31.5 in June from 41.9 in May which was the weakest level since November. Pullbacks in the euro have proven short-lived of late as markets have loosened ties to the dollar given America’s growth setback to start the year which has muddied the outlook for higher U.S. interest rates.

USD

The dollar held broad gains following mixed news on America’s housing sector. Housing starts were down 11.1 percent in May to an annual pace of 1.04 million units, giving back some of its 22.1 percent surge in April which was the fastest since late 2007. On the bright side, building permits, a leading indicator of future housing starts, soared 11.8 percent to the healthiest level since August 2007. Key for the dollar from the Fed this week will be where the central bank sees the U.S. economy and interest rates headed over the coming years. Any steeper trajectory of rate increases compared to market expectations would be dollar-positive. But if the Fed should go to great lengths to drive home a gradualist approach to lifting rates it would limit gains for the dollar. Any signaling of a later liftoff in rates beyond September would be dollar-negative.

CAD

A steady Canadian dollar kept within a few pennies of multimonth lows against its U.S. counterpart. Oil firmed but remained below $60, offering little support to the loonie. USDCAD could break out of a relatively confined range with the Fed due to render an important policy decision Wednesday and key numbers on the Canadian consumer due Friday.