U.S. inflation report takes some time off the Fed's bond purchases


U.S. core CPI slightly softer than expected in July 2008, as expected.

The euro rises, but is within 3 mile of the US budget target for 2021 (-0.15).

New York, Aug 11 - The dollar fell on Wednesday after U.S. inflation data showed consumer price increases eased in July, taking some pressure off the Federal Reserve to begin scaling back its monthly bond purchases that are part of its toolbox to support the economic recovery.

The dollar index, which measures the greenback against a basket of other major currencies was in it down 0.17% at 92.915 at 3:05 p.m. The U.S. currency hit 93,195 its highest since April 1 and not far from its 2021 high of 93.439, but sold off when data showed the consumer price index rose 0.5% after climbing 0.9% in June last month. Excluding volatile food and energy components, the CPI increased 0.3% after increasing 0.9% in June.

Economists polled by Reuters forecast that the core CPI would rise 0.5% and general CPI 0.4%.

While prices are still rising, the Fed has said it expects inflation pressures to moderate over time as demand catches up with demand after months of COVID - 19 lockdowns.

The CPI report was enough to cause a bit of profit taking for the U.S. dollar, but at the end of the day, it's not a game changer for the Fed, said Kathy Lien, managing director at BK Asset Management. They're still going to be announcing taper, possibly within the next six weeks.

The greenback had already enjoyed a lift from last week's better than anticipated U.S. unemployment data as well as from remarks by Fed officials about tapering bond purchases and, eventually, raising rates sooner than policymakers elsewhere.

Looking ahead, the Fed will depend on data when it comes to the timing of the dialing back of its asset purchases, said OANDA senior market analyst Edward Moya.

The report is all about its next month and if that does not impress, tapering, as far September goes might even get pushed out towards the end of the year, he said.

In Germany, investor sentiment has declined with a survey showing a third straight month of deterioration in Europe as rising global COVID- 19 cases keep markets on edge.

Investors have to take on board the possibility of news on Fed tapering at a time when COVID is still very evident in various parts of the world, said Rabobank analyst Jane Foley.

The consequence of this will be a stronger dollar, she added, especially if the euro breaches its 2021 low.

The euro gained 0.16% against the greenback to 1.17395, after six straight sessions of losses and having fallen as low as 1.1706 in early deals in Europe near the year's low of $1.1704.

Sterling gained 0.2% to 1.38645 against the dollar, driving back from a two-week low.

The Yen was now up 0.12% against the dollar at 110.445, after dropping for five consecutive sessions against the dollar.

South Korea reported a record number of COVID - 19 cases on Wednesday while outbreaks in China, Southeast Asia and Australia grow steadily

The Australian dollar and the New Zealand dollar seen as riskier currencies increased after the U.S. CPI report, last up 0.33% and 0.5% respectively.

In cryptocurrencies, bitcoin reached $46,787. 60, the highest since May 17th. Bitcoin was the last to increase 1.5% at $46,304. 54, while ether, the second largest cryptocurrency, was up 2.7% for $3,226. 18.