US Dollar Index Steady Near 98.50 Ahead of Key CPI Inflation Data

DXY Holds Steady Ahead of Inflation Data and Fed Signals

The US Dollar Index (DXY) is treading water around 98.50 during the early Asian session on Tuesday, as traders exercise caution ahead of the release of the much-anticipated US Consumer Price Index (CPI) inflation data for July. The index, which measures the greenback’s strength against a basket of six major currencies, has shown little movement in recent hours amid rising uncertainty over future Federal Reserve (Fed) policy moves.

With the US economy recently showing weaker-than-expected employment and PMI data, traders have begun increasing bets on a potential Fed rate cut, possibly as early as September. Market participants hope that today’s inflation report will offer clearer direction on the central bank’s next steps.

Expectations for July CPI: Focus on Inflation Trends

Economists forecast the headline CPI to rise 2.8% year-over-year (YoY) in July, while core CPI (excluding food and energy) is expected to climb 3.0% YoY. A softer-than-expected reading may reinforce expectations of a rate cut, potentially pushing the US Dollar Index lower in the short term.

Meanwhile, several Fed officials, including Thomas Barkin and Jeffrey Schmid, are scheduled to speak later in the day. Their commentary could further sway market sentiment, depending on how they interpret inflation trends and the broader economic outlook.

Tariff Delay Provides Breathing Room

Adding to the cautious optimism, President Donald Trump signed an executive order on Monday delaying a new round of tariffs on Chinese imports for another 90 days. This move, aimed at maintaining trade stability, has helped ease some pressure on risk sentiment, though it has had a limited direct impact on the DXY so far.