EUR/USD bulls defend the 1.18 figure

EUR/USD is trading at 1.1800 into the close on Wall Street and flat on the day within a 45 pip range between 1.1800 and 1.1845.

The dollar fell against major currencies on Tuesday after data showed a less-than-expected rise in US inflation last month, creating uncertainty about the timing of the Federal Reserve's tapering of asset purchases. In afternoon trading, the dollar index was slightly down at 92.601, moving away from a more than a two-week high on Monday.

August's Consumer Price Index rose in the smallest gain since February and followed a 0.3% rise in July. The so-called core CPI increased 4.0% on a year-on-year basis after advancing 4.3% in July. The dollar index fell 0.1% to 92.498 further retreating from more than a two-week high on Monday.

The less-than-expected rise in US inflation last month is creating uncertainty as to the timing of the Federal Reserve's tapering of asset purchases. Several Fed officials have suggested that the US central bank could reduce buying debt securities by the end of the year.

Fed eyed next week

Looking ahead, the Federal Reserve will hold a two-day monetary policy meeting next week. The prospect of a hawkish twist is supporting the greenback as investors look to the central bank to Taper. This tends to benefit the dollar as it suggests the Fed is one step closer toward tighter monetary policy. 

Risk appetite soured on Tuesday as well, with Wall Street shares down while U.S. Treasury prices were up sharply, pushing yields lower.