US Dollar Index falls back amid uncertainty over US-China trade meeting outcome

• The US Dollar Index gives up initial gains amid anxiety among investors with US-China trade negotiations in process.
• A positive outcome from the Sino-US trade talks could bring some certainty in the US economic outlook.
• The Fed is not expected to cut interest rates before September policy meeting.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, gives back its early gains and flattens around 99.00 during European trading hours on Tuesday. The USD Index retreats as investors turn anxious amid going trade talks between top negotiators from the United States (US) and China in London.

During European trading hours, US Commerce Secretary Howard Lutnick told reporters that trade talks with Beijing are going well and negotiations will likely continue all the day, Reuters reported.

The impact of the outcome of trade negotiations between world's two largest economies will be significant on the US Dollar. A positive outcome from the US-China meeting could bring back investors' confidence in the safe-haven appeal of the US Dollar (USD), assuming that it will provide some certainty over the US economic outlook.

The Greenback has been hit badly in past few months as the imposition of new economic policies by US President Donald Trump and erratic announcements on the tariff policy led investors doubting the credibility of the US Dollar.

On the domestic front, the US Consumer Price Index (CPI) data for May will be the key trigger for the US Dollar, which will be released on Wednesday. As measured by the CPI, the headline and core inflation are expected to have grown at a faster pace of 2.5% and 2.9%, respectively. Such a scenario would force traders to pare vets supporting the Federal Reserve (Fed) to reduce interest rates in the near-term.

According to the CME FedWatch tool, the US central bank is unlikely to cut interest rates before the September monetary policy meeting.