US Dollar Index (DXY) sticks to mild positive bias around mid-97.00s, lacks follow-through

• The USD trades with positive bias for the second straight day, though it lacks bullish conviction.
• Thursday's US macro data reinforced the view that the Fed will keep rates steady and lends support.
• Concerns about the Fed's independence cap gains as the focus shifts to the FOMC meeting next week.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, ticks higher for the second straight day on Friday, though it lacks bullish conviction. Moreover, the fundamental backdrop warrants some caution before positioning for an extension of the overnight bounce from a two-and-a-half-week low.

Data released on Thursday pointed to a still resilient US labor market. Adding to this, a first look at S&P Global's PMI revealed employment strength across both the manufacturing and services sectors, which, along with intensifying price pressures, suggests that inflation could accelerate in the second half of the year. This reinforces the market view that the Federal Reserve (Fed) will keep interest rates unchanged at the upcoming meeting next week and turns out to be a key factor acting as a tailwind for the US Dollar (USD).

Meanwhile, US President Donald Trump continued to dial up the pressure on Fed Chair Jerome Powell and expressed his desire for lower interest rates during a rare visit to the central bank's headquarters. Furthermore, investors remain worried that the Fed's independence could be under threat on the back of mounting political interference. This, along with concerns about the potential negative economic impact from higher import prices, is holding back the USD bulls from placing aggressive bets and capping any further gains.

Investors also seem reluctant and might opt to wait for more cues about the Fed's rate-cut path. Hence, the focus will remain glued to the outcome of a two-day FOMC monetary policy meeting, starting next Tuesday. In the meantime, Friday's release of US Durable Goods Orders might influence the USD price dynamics later during the North American session. Nevertheless, the DXY seems poised to register losses for the first time in three weeks, though the mixed fundamental backdrop warrants some caution.