Dollar Holds Steady Below 98.00 as Traders Await Key US CPI Data

The US Dollar Index (DXY) remained flat around 97.85 in Thursday’s Asian session, with investors cautious ahead of the release of August CPI inflation figures later today.

PPI Weakness Fuels Fed Rate Cut Bets

The dollar came under pressure after the latest Producer Price Index (PPI) report pointed to softer inflation trends. Data from the US Bureau of Labor Statistics showed that the PPI slipped 0.1% month-on-month in August, compared to the previous 0.7% rise (revised from 0.9%). On a yearly basis, PPI eased to 2.6% from 3.3% in July, undershooting market expectations of 3.3%.

Core PPI, excluding food and energy, also weakened, falling 0.1% MoM and rising just 2.8% YoY, well below July’s 3.7% and missing forecasts of 3.5%.

Fed Rate Cut Bets Intensify

The weaker data reinforced expectations that the Federal Reserve will begin cutting rates at its September meeting. According to the CME FedWatch Tool, markets are fully pricing in a 25 bps cut, while the odds of a more aggressive 50 bps cut have risen to nearly 12%.

CPI in Focus for Market Direction

All eyes now turn to the US CPI report due later today. Markets expect headline CPI to rise 2.9% YoY in August, while core CPI is projected at 3.1% YoY. A stronger-than-expected reading could give the dollar short-term support, but softer inflation would only strengthen the case for further Fed easing, potentially pushing the DXY lower.

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