US Dollar Index Slips to 98.00 as Fed Rate Cut Bets Rise, Independence Concerns Emerge

US Dollar Index Slides to 98.00 on Fed Rate Cut Speculation and Political Noise

US Dollar under pressure amid dovish Fed outlook
The US Dollar Index (DXY), which tracks the performance of the USD against a basket of six major currencies, slipped toward the 98.00 mark in Wednesday’s Asian trading session. The move extends recent weakness as markets continue to price in more aggressive policy easing by the Federal Reserve following cooler-than-expected inflation figures.

July CPI softens, market bets on imminent Fed cuts
Data released Tuesday showed that US inflation, as measured by the Consumer Price Index (CPI), remained unchanged at 2.7% year-over-year in July, slightly below the expected 2.8%. Core CPI, which excludes food and energy, rose 3.1%, modestly higher than the prior month’s 2.9% but still within the Fed’s tolerance band.

The reaction was swift: traders using the CME FedWatch Tool now price in a 94% probability of a 25 basis point rate cut at the Fed’s September meeting — a notable increase from 85% prior to the CPI release. The rising odds of further rate cuts in October and December are also weighing on USD sentiment.

Fed independence questioned amid Trump lawsuit rumors
In a surprising twist, political developments have added to USD weakness. White House spokeswoman Karoline Leavitt stated that US President Donald Trump is considering legal action against Federal Reserve Chair Jerome Powell over the handling of renovation works at the Fed’s Washington headquarters. Though the legal implications remain unclear, the suggestion of direct political interference raises red flags about the Fed’s independence — a critical factor in market trust.

Eyes on Fedspeak and PPI data ahead
Markets now turn their attention to scheduled speeches from Fed officials, including Austan Goolsbee and Raphael Bostic, later on Wednesday. Their tone will be closely analyzed for additional clues ahead of the upcoming release of Producer Price Index (PPI) inflation data.

Outlook
With mounting expectations for monetary easing and political distractions clouding the Fed’s credibility, the DXY could face sustained pressure in the short term. A confirmed break below 98.00 could open the door for a deeper retracement toward the 97.50–97.20 support zone.