Insights 
VT 
Key Points:
- The Dollar Index (USDX) rose 0.15% to 97.831, marking its third straight daily gain.
- August’s Producer Price Index (PPI) fell 0.1%, after July’s 0.7% rise was revised lower.
- Traders see a 25 bps Fed rate cut next week as a done deal, with an 8.9% chance of a 50 bps cut.
The US dollar stabilised in Asia, buoyed by easing inflation data and rate-cut expectations. As of 08:47 GMT, the Dollar Index stood at 97.831, up 0.147 points or 0.15%.
This marked the third consecutive session of gains, following a period of weakness earlier in the month. The catalyst came from the Bureau of Labor Statistics, which reported a 0.1% decline in the PPI for final demand in August—down from the 0.7% rise in July, which itself was revised lower.
This soft inflation reading cemented expectations that the Federal Reserve will pivot towards policy easing. Analysts now expect the Fed to cut rates at the 16–17 September meeting, with a 25 basis point move considered a near certainty.
Traders are even pricing in a nearly 9% chance of a 50 basis point cut, highlighting the strength of the dovish tilt priced into markets.
However, with the US Consumer Price Index (CPI) data due later today, a surprise in either direction could shift sentiment rapidly. Traders are cautious, knowing that a sticky CPI could pare back expectations for deeper cuts.
Political Disruption Weighs on Fed Independence
In parallel with the data-driven Fed narrative, political developments have added another layer of uncertainty.
President Trump’s administration is attempting to remove Federal Reserve Governor Lisa Cook, appealing a judge’s ruling that temporarily blocks her dismissal.
The White House’s push to influence the Federal Reserve’s composition ahead of the September meeting has raised eyebrows in policy circles.
Stephen Miran, a Trump nominee to the Board, is also edging closer to confirmation after a successful Senate Banking Committee vote. However, lawmakers remain uncertain whether his appointment can be finalised in time to impact next week’s decision.
The politicisation of the Fed’s governance, even if incomplete, could rattle confidence in the institution’s independence and weigh on dollar sentiment in the longer term.
Technical Overview
The US Dollar Index (USDX) is trading at 97.83, up +0.15%, though it remains locked in a broad downtrend from its February 2025 high of 108.39. After hitting a yearly low near 95.97 in July, the index has stabilised but continues to struggle to reclaim the 100 level, suggesting persistent selling pressure.
The moving averages (5,10,30) are flat, signalling indecision, while the MACD hovers near the zero line, reflecting weak momentum. Immediate support rests at 96.00, with a break lower exposing July’s low. On the upside, resistance stands at 99.00, followed by 101.00, levels that bulls must reclaim to shift sentiment back in their favour.
Cautious Forecast
Over the short term, the Dollar Index is likely to remain range-bound between 97.50 and 98.00 as the market absorbs inflation data and potential Fed policy signals.
A stronger-than-expected CPI reading could push USDX toward 98.30, but dovish rhetoric or political noise from the White House could erase those gains quickly.
Looking to the medium term, the Fed’s policy path and Trump’s continued push to reshape the central bank’s leadership will dominate price action.
If the Fed cuts rates once or twice before year-end without damaging forward guidance, the dollar may hold near current levels.
However, aggressive political interference or signs of deeper disinflation could send the index back toward 96.00 in Q4.
