European session review: USD remains under pressure amid persistent uncertainty over Fed’s tapering timeline

USD weakened against other major currencies in the European session on Wednesday, as yesterday’s slightly-better-than-feared report on the U.S. consumer inflation for August cooled somewhat concerns of a sudden tapering in the  Federal Reserve’s monetary stimulus, but gave no answer on investors’ major question - when the U.S. central bank will start paring its debt purchases. 

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, decreased  0.17% to 92.47.

The U.S. Labor Department reported on Tuesday that the U.S. consumer prices in August rose 0.3% m/m and 5.3% y/y. Economists had forecast the consumer price index (CPI) to increase 0.4% m/m and 5.3% y/y. Meanwhile, stripping out food and energy, the CPI  was up  0.1% m/m and 4.0% y/y.

Market participants judged that the latest CPI report corroborates the Fed's view that the inflationary pressures are likely to be transitory and could provide the bank’s policymakers with a bit more time to decide on further policy actions. However, it doesn't provide clarity on the timing of the Fed tapering.

Earlier this month, several Fed officials stated that the U.S. central bank should start reducing bond purchases by the end of the year, despite a steep slowdown in the U.S. jobs growth in August. Investors’ focus is shifting towards the Fed’s two-day policy meeting, set to begin on September 21.

Meanwhile, China’s latest set of economic data, which pointed to weaker growth, added to growth concerns. The world's second-largest economy reported retail sales, industrial production, and fixed asset investment data for August that missed economists’ forecasts.