US Dollar Index flat below mid-98.00s as traders await key US inflation data

The US Dollar Index (DXY), which measures the greenback against a basket of major currencies, is struggling to extend the previous session’s modest rebound and remains confined to a narrow range during Asian trading on Thursday. The index is hovering just below the mid-98.00 area, virtually unchanged on the day, as investors refrain from taking fresh positions ahead of crucial US inflation data.

Market attention is firmly focused on the release of the US Consumer Price Index (CPI) later in the North American session. The data is expected to provide important clues about the Federal Reserve’s future policy direction and is likely to determine the next directional move for the dollar. Ahead of the release, lingering dovish expectations surrounding the Fed continue to weigh on the USD and limit upside momentum.

Despite the Fed’s cautious stance, markets are increasingly pricing in the possibility of two additional interest rate cuts in 2026, amid clearer signs of cooling in the US labor market. Speculation has also grown that the next Fed chair could adopt a more dovish approach under political pressure. US President Donald Trump reinforced these expectations on Wednesday, stating that the next head of the Fed would strongly favor lower interest rates.

That said, some support for the dollar has emerged from comments by Federal Reserve Governor Christopher Waller, one of the leading candidates to succeed Jerome Powell. Waller emphasized that he would stress the importance of central bank independence in discussions with President Trump, helping to temper fears of aggressive political influence over monetary policy. Even so, the broader fundamental backdrop remains skewed toward the downside, suggesting that bearish pressure on the dollar is likely to persist.

From a technical standpoint, the outlook for the greenback also remains fragile. The recent breakdown and the failure to reclaim the closely watched 200-day Simple Moving Average reinforce a near-term bearish bias. As a result, any short-term rebounds in the US Dollar Index may still be viewed as selling opportunities, warranting caution before positioning for a sustained recovery from levels last seen in early October.