US Dollar Index (DXY) Slips Below 98.00 as Inflation Data Impact Fades

US Dollar Index (DXY) Slips Below 98.00 as Inflation Data Impact Fades

The US Dollar Index (DXY) fell below the 98.00 mark during Wednesday’s European session, easing from a three-week high of 98.25 reached on Tuesday. While the index remains on an overall bullish trend, the initial post-CPI rally appears to be losing steam as traders reassess the broader inflation outlook.

June CPI Boosts USD — But Momentum Wanes

The rally in the Greenback followed hotter-than-expected June Consumer Price Index (CPI) data:

Key CPI Figures:

• Headline CPI YoY: 2.7% (vs. 2.4% in May)
• Core CPI YoY: 2.9% (vs. 2.8%)
• MoM CPI: Headline 0.3%, Core 0.2%

The data confirmed that import tariffs are starting to influence price dynamics, reigniting concerns about sticky inflation.

Fed Caution Reinforces USD Support

Despite the dip in DXY, hawkish Fed commentary continues to provide a floor for the US Dollar. On Wednesday, Dallas Fed President Lorie Logan emphasized the need to maintain rates at current levels for a longer period to counter upside inflation risks from Trump’s tariff agenda.

Logan’s stance:
“Keeping interest rates steady is appropriate as we observe the delayed effects of tariffs and elevated inflation pressure.”

Markets have scaled back expectations for rate cuts, which keeps USD shorts in check even as profit-taking emerges.

Focus Now Shifts to US PPI and Fed Outlook

Investors are now looking ahead to Wednesday’s Producer Price Index (PPI) release, expected to show a mild cooling in inflation. If confirmed, it could ease rate hike fears and weigh further on the US Dollar.

Key Events to Watch:

• US PPI (June)
• Fed Beige Book
• Industrial Production report

Related Reads on Tredu.com:

• US CPI Surprises to the Upside – What It Means for the Dollar
• Fed Policy Tracker: Who’s Hawkish and Who’s Not?
• Tariffs and the Dollar: Navigating Trump’s Trade Policy