US Dollar Index holds losses near 98.50 ahead of Michigan Consumer Sentiment

• US Dollar Index edged lower as markets expect the Fed to start policy easing in September.
• San Francisco Fed President Mary Daly noted that expecting two rate cuts this year is a "reasonable" outlook.
• US Retail Sales rose by 0.6% MoM, while Retail Sales climbed 3.9% YoY in June.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is retracing its recent gains from the previous session and hovering around 98.50 during the Asian hours on Friday. Traders will likely observe the University of Michigan Consumer Sentiment, Building Permits, and Housing Starts later in the day.

The Greenback loses ground amid easing risk aversion following the dovish remarks from Federal Reserve (Fed) officials. Moreover, Financial markets are now pricing in a September starting date for Fed rate cuts, according to Reuters.

On Thursday, San Francisco Fed President Mary Daly called two rate cuts this year a "reasonable" outlook, while warning against waiting too long. Daly also added that rates will eventually settle at 3% or higher, which is higher than the pre-pandemic neutral rate.

Meanwhile, Fed Governor Christopher Waller said the Fed should cut interest rates 25 basis points at the July meeting. Waller also noted that rising risks to the economy favor easing the policy rate. If underlying inflation remains in check and growth tepid, more cuts are needed, he added.

However, FOMC Governor Adriana Kugler noted that it is appropriate to keep the policy rate of interest steady "for some time," given low unemployment and building price pressure from tariffs. Kugler highlighted that inflation remains above the 2% target, and the labor market is stable and resilient.

However, the upbeat economic data from the United States (US) has trimmed the odds of the Federal Reserve (Fed) easing monetary policy. US Retail Sales rose by 0.6% month-over-month in June versus -0.9% prior. This figure came in above the market consensus of 0.1%. Meanwhile, the annual Retail Sales climbed 3.9%, compared to a rise of 3.3% in May. Moreover, Initial Jobless Claims for the week ending July 12 fell to 221K from 228K, and came in below the expected 235K.