US consumer prices increased 0.4% for September, slightly above consensus forecasts of a 0.3% increase with the year-on-year rate edging higher to 5.4% from 5.3% previously. There was a further significant increase in energy prices with a gain of close to 25% over the year. There was a monthly decline for apparel and used car prices which helped moderate overall price increases. The core increase was in line with expectations at 0.2% with the annual rate remaining at 4.0%.

The dollar initially edged higher, but failed to sustain the move as lower yields undermined potential support with EUR/USD recovering to around 1.1570.

Minutes from September’s Fed policy meeting confirmed that the tapering of bond purchases could begin in mid-November or December and it would be appropriate to complete the process around mid-2022 with reductions of $15bn per month. There were, however, also comments that a distinct and more stringent test would need to be met before there was interest rate increase. There were diverse opinions surrounding the inflation outlook, although the majority of members thought that risks were skewed to the upside. There was also further uncertainty surrounding the labour-market outlook with some members considering that a full recovery was unlikely.

The dollar recovered briefly after the minutes, but lost ground again with tapering priced in and EUR/USD rallied to highs at 1.1600 before fading marginally on Thursday.

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