US Dollar Index maintains position near 99.00 ahead of ISM PMI data

• The US Dollar Index moves little amid rising concerns over the Federal Reserve's independence.
• The Fed is expected to deliver a 25 basis point rate cut in September after weaker labor data.
• Fed's Daly highlighted reasons to start considering interest rate cuts, though prevailing uncertainty makes the decision difficult.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is holding ground for the second successive day and trading around 98.80 during the European hours on Tuesday. The US ISM Services Purchasing Managers Index (PMI) will be eyed later in the North American session.

The US Dollar remains steady as traders grow cautious amid increasing concerns about the US Federal Reserve's (Fed) independence. Fed Governor Adriana Kugler unexpectedly resigned on Monday. This event has provided US President Donald Trump with an earlier-than-anticipated opportunity to influence the central bank. Trump may nominate a replacement potentially more aligned with his calls for lower rates.

However, the US Dollar (USD) may struggle due to rising odds of an interest rate cut by the US Federal Reserve (Fed) in September, following weaker labor market data that has heightened concerns over the US economic outlook. According to CME's FedWatch Tool, markets are pricing in a 91.6% chance of a Federal Reserve rate cut next month.

On Monday, Fed Bank of San Francisco President Mary C. Daly stated that although there are plenty of reasons to start looking at interest rate cuts. However, prevailing uncertainty makes it difficult for Fed officials to step into rate trimming too quickly. We can't wait to be certain there is no inflation persistence, need to make a call based on what's most likely, Daly added.