Dollar Index Approaches 100 as Markets Await Inflation Data

The U.S. Dollar Index (DXY) has been rising for three consecutive days, approaching the key psychological level of 100.00.

This recent strength is primarily driven by investors adjusting their expectations for the Federal Reserve's interest rate policy ahead of the upcoming U.S. inflation data release.

The Fed's next move will be closely watched, with market participants divided on the likelihood of further rate hikes. According to market-based rate instruments, expectations for a 25-basis-point rate hike in September have declined slightly, with the implied probability now around 48%, down from approximately 52% previously.

The trajectory of U.S. inflation will dictate the dollar's medium-term direction, and investors are awaiting the release of CPI data to gauge whether price pressures ease or accelerate.