Ella 
The dollar index fell for the second consecutive day in the Asian session on Thursday, trading around 104.95. The dollar index fluctuated lower despite the cautious stance of Federal Reserve Chairman Powell on monetary policy. Investors will focus on the U.S. Consumer Price Index (CPI) inflation data for June, the number of initial jobless claims in the United States last week, and the speech of Federal Reserve official Rafael Bostic.
On Wednesday, Federal Reserve Chairman Powell told the U.S. House Financial Services Committee that the Fed will make interest rate policy decisions based on published economic data, upcoming data, changing prospects and the balance of risks, without considering political factors. Powell also said that it would be inappropriate to lower the policy rate until he has greater confidence that inflation can sustainably move toward the Fed’s 2% target.
Meanwhile, Federal Reserve Governor Lisa Cook said on Thursday that U.S. inflation should continue to fall if there is no further sharp increase in the unemployment rate. The Fed’s cautious stance on monetary policy failed to boost the dollar as traders awaited the key U.S. inflation report to be released on Thursday. The annual inflation rate in the United States in June is expected to be 3.1%, while the annual core inflation rate is expected to remain at 3.4%.
If inflation is lower than expected, it may further suppress the US dollar index. The Chicago Mercantile Exchange Fed Watch tool shows that the market is pricing in less than 10% probability of a Fed rate cut in July, while pricing in a 73% probability of a Fed rate cut in September.
On the other hand, risk aversion before the release of key economic data, as well as the uncertain political outlook in Europe and the continued geopolitical risks in the Middle East, may provide some support for the safe-haven asset US dollar.
