US Dollar Index weakens below 99.00 as soft US CPI inflation data keeps Fed on track for rate cut

• US Dollar Index loses ground to around 98.80 in Monday's early Asin session.
• Fed is widely expected to cut the fed funds rate by 25 bps on Wednesday.
• Traders await the US-China trade talks later on Thursday for fresh impetus. 

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 negative note near 98.80 during the early Asian session on Monday. The DXY softens amid the prospect of a US rate cut after moderate inflation figures on Friday.

The US Federal Reserve is widely expected to cut its current benchmark interest rate of 4.0% to 4.25% by a quarter percentage point on Wednesday after a softer-than-expected inflation report. The US Consumer Price Index (CPI) rose 3.0% YoY in September, versus 2.9% prior, according to the US Bureau of Labor Statistics (BLS) on Friday. This figure came in below the market expectation of 3.1%. 

Meanwhile, the core CPI climbed 3.0% YoY in September, compared to 3.1% in August, softer than the 3.1% expected. On a monthly basis, the CPI increased 0.3% following the 0.4% rise seen in August, while the core CPI increased 0.2%, compared to the market consensus of 0.3%. 

Nonetheless, the optimism surrounding US-China trade talks eases concerns over a trade war between the world's two largest economies. US Treasury Secretary Scott Bessent said trade talks on the sidelines of a summit of the ASEAN in Kuala Lumpur have eliminated the possibility of the US imposing 100% tariffs on Chinese imports starting November 1.

Bessent added that he expects China to delay implementation of its rare earth minerals and magnets licensing regime by a year while the policy is reconsidered. US President Donald Trump will meet Chinese President Xi Jinping later on Thursday to decide on the framework of a trade deal.