USD traded mixed against other major currencies in the European session on Tuesday as investors awaited the release of the U.S. inflation data for August (due at 12:30 GMT), hoping to get clues on the timing of stimulus withdrawal by the U.S. Federal Reserve. 

The U.S. currency rose against  AUD and NZD, declined against GBP, and changed little against JPY, EUR and CAD.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, edged down 0.05% to 92.63.

Economists forecast that consumer prices in August rose 0.4% m/m and 5.4% y/y. These readings come after the report on producer prices for August, which showed a 0.7% m/m gain and an 8.3% y/y jump, the largest annual advance since the 12-month data were first calculated in November 2010. 

It is believed that hotter-than-expected August inflation data could compel the Fed’s officials to announce the tapering of the bond purchases, when they gather for a two-day policy meeting on September 21. At the same time, the data showing a cooling of inflation pressure would give the U.S. central bankers another month of breathing space to watch the incoming data and the development of the coronavirus situation in the U.S.

Earlier this month, several Fed policymakers 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.