US Dollar Index holds steady below 98.00 ahead of US CPI data

• US Dollar Index trades flat near 97.85 in Thursday's Asian session. 
• US annual PPI inflation came in softer than expected, supporting the case for a Fed rate cut. 
• Traders await the US August CPI inflation data, which is due later on Thursday. 

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades on a flat note around 97.85 during the Asian session on Thursday. Traders brace for the US Consumer Price Index (CPI) for August later on Thursday for fresh impetus. 

An unexpected decline in the US Producer Price Index (PPI) bolstered expectations that the US Federal Reserve (Fed) will cut rates next week, which might weigh on the DXY. The US PPI declined by 0.1% MoM in August, compared to the 0.7% increase (revised from 0.9%) in the previous reading, the US Bureau of Labor Statistics (BLS) showed Wednesday. This figure came in below the market consensus of a 0.3% rise. On an annual basis, the US PPI rose 2.6% in August, versus a rise of 3.3% in July.

Meanwhile, the core PPI, which excludes food and energy prices, declined by 0.1% on a monthly basis in August. The core PPI rose 2.8% on a yearly basis after rising 3.7% in July and missing analysts' estimate of 3.5% by a wide margin.

Financial markets are now fully pricing in a 25 basis points (bps) rate cut at the Fed's September meeting, while the possibility of a larger 50 bps reduction has also risen to nearly 12%, according to the CME FedWatch tool.

The US August CPI inflation report will be closely watched later on Thursday. This report could offer some hints about the US interest rate path. If the report shows a hotter-than-expected inflation, this might boost the Greenback in the near term.