Dollar Holds Weakness Ahead of US PCE, Trading Near 98.92

The dollar index remained weak on Wednesday, trading near 98.92 and failing to reclaim the 99 level. Investors adjusted positions ahead of key US inflation data, with market sentiment turning cautious. The closely watched US Personal Consumption Expenditures (PCE) price index is due soon, a key gauge for the Federal Reserve in measuring inflation pressures, and its performance will directly influence market expectations for the future monetary policy path.

**Inflation Data as Short-Term Barometer**

Markets are widely focused on whether the PCE data can provide clearer guidance on rate cut expectations. If inflation data shows an unexpected decline, it could strengthen bets on an earlier Fed rate cut, further pressuring the dollar. Conversely, if the data proves sticky, it may offer the dollar a brief respite. Analysts note that increased FX volatility ahead of the data release is typical risk-off adjustment, and month-end portfolio rebalancing could also amplify price swings.

**Markets Await Powell's Tone**

Beyond inflation data, Fed Chair Jerome Powell's speech at the Jackson Hole global central bank symposium on Friday is another major risk event this week. Markets hope to glean clues on the timing and magnitude of rate cuts from his remarks. Recent US economic data has been mixed, and Fed officials' rhetoric has varied, leaving market pricing for the policy outlook divided. Ahead of Powell's speech, the dollar lacks clear directional drivers and is likely to remain range-bound.

**Dollar's Short-Term Pressure Remains Unchanged**

Although the dollar index has found some support near 98.90, it remains in recent lows overall. Among non-US currencies, major counterparts like the euro and pound remain relatively strong, pressuring the dollar. Some independent analysts suggest that if the dollar continues its current weakness, the euro-dollar pair could fluctuate in the 1.14 to 1.16 range. Overall market sentiment indicates that, unless rate cut expectations fundamentally reverse, the dollar's rebound potential is likely limited.