Fed Rate Cut Bets Rise Amid Softer US Data and CPI Anticipation
However, the expectations for a September rate cut have surged following weaker US jobs and PMI figures. According to market forecasts, headline CPI is expected to rise 2.8% YoY in July, while core CPI is projected to increase 3.0% YoY.
Hence, the softer-than-expected print could strengthen market conviction for an imminent policy easing, potentially dragging the DXY lower.
Money markets now price in a 90% probability of a September cut, with 58 basis points of total easing anticipated by year-end, equivalent to two quarter-point cuts and a one-in-three chance of a third.
US-China Tariff Delay Fails to Lift the Dollar
Meanwhile, positive trade developments have done little to boost the greenback. US President Donald Trump announced a 90-day delay on implementing sweeping tariffs against China, extending talks just hours before the current agreement’s expiry.
In response, China’s Commerce Ministry stated it would suspend adding certain US firms to its unreliable entity and export control lists for the same period.
Despite easing trade tensions, the muted reaction in DXY suggests traders remain focused on upcoming US inflation data and Fed guidance as the main drivers for the index’s next move.
