US Dollar Index holds above 97.50 ahead of UoM Consumer Sentiment Index data

• US Dollar Index maintains its position as traders adopt caution ahead of the Michigan Consumer Sentiment Index data.
• The US Dollar may lose ground as the odds of a half-point rate cut by the Federal Reserve increase.
• US Treasury Secretary Scott Bessent is set to meet Chinese counterparts in Madrid next week for continued high-level talks.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is recovering its recent losses and trading around 97.70 during the Asian hours on Friday. The Greenback holds gains ahead of the release of the University of Michigan (UoM) Consumer Sentiment Index due later in the North American session.

However, the US Dollar faced challenges as recent mixed key economic data from the United States (US) firmed a Federal Reserve (Fed) 25 basis-point rate cut next week. The chance that the US central bank will cut by a half percentage point also edges higher.

The US Consumer Price Index (CPI) rose 2.9% year-over-year in August, as expected, coming in higher than 2.7% in July. Meanwhile, the CPI inflation climbed to 0.4% month-over-month from a 0.2% increase prior. The core CPI, which excludes volatile food and energy prices, increased 3.1% on a yearly basis in August, matching the estimate. US Initial Jobless Claims rose to 263K, the highest since 2021, against the expected 235K and 236K prior (revised from 237K).

Reuters cited the US Treasury, saying on Thursday that Treasury Secretary Scott Bessent will meet Chinese Vice Premier He Lifeng and other senior officials in Madrid next week to continue high-level discussions on trade, economic, and national security issues. During the trip, Bessent will also meet government counterparts in Madrid and London before joining US President Donald Trump for his September 17-19 state visit with Britain's King Charles.