US Dollar Index Slips Toward 98.00 as Fed Rate Cut Bets Grow Ahead of Key CPI Data

The US Dollar Index (DXY) drifted lower in Asian trading on Monday, hovering near the 98.00 mark as dovish Federal Reserve expectations weighed on the Greenback. Traders are shifting their focus to Tuesday’s US Consumer Price Index (CPI) release, followed by Thursday’s Producer Price Index (PPI) and the UK’s preliminary Q2 GDP data.

The latest soft US economic figures have fueled speculation of multiple rate cuts this year. Weaker July Nonfarm Payrolls and higher Initial Jobless Claims have strengthened market expectations for a September Fed rate cut, with CME FedWatch data now showing an 89% probability—up from 80% last week. Another cut in December remains on the table.

Fed Governor Michelle Bowman reinforced the dovish tone over the weekend, stating that three rate cuts are likely appropriate in 2025, adding that the labor market’s apparent slowdown outweighs inflation risks. Her comments came alongside caution from St. Louis Fed President Alberto Musalem, who warned that downside risks to jobs could prevent the Fed from meeting both its inflation and employment goals.

With rate cut expectations firmly priced in, the US Dollar could remain under pressure unless upcoming CPI data delivers a significant upside surprise.

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