By Milad Azar, Market Analyst at XTB MENA

The US dollar was trading sideways, with the Dollar Index (DXY) hovering near the 99-point level. Traders could remain cautious ahead of the release of the PCE data later today. Consensus points for a 0.2% monthly increase. An equal or softer-than-expected figure could validate the current dovish narrative and likely keep the dollar under pressure. By contrast, a surprise to the upside in inflation data could trigger a rebound in the US dollar as monetary policy expectations could turn to more caution.

Markets now assign an 87% probability for a 25 bps rate cut at next week’s FOMC meeting, in addition to more easing during 2026. Softer US labour and activity data in recent weeks have reinforced expectations of a softer monetary policy. Speculation that the director of the National Economic Council Kevin Hassett could replace Jerome Powell as Fed Chair in 2026 has also contributed to the dovish tilt.