US Dollar Index holds steady near 98.50 ahead of US CPI inflation data

• US Dollar Index trades flat around 98.50 in Tuesday's Asian session. 
• US CPI inflation report for July will be in the spotlight later on Tuesday.
• Trump signed an executive order extending a pause in higher US tariffs on Chinese imports for another 90 days. 

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 near 98.50 as traders prefer to wait on the sidelines ahead of a key US inflation report, which is due later on Tuesday. Additionally, the Federal Reserve (Fed) officials are scheduled to speak later in the day, including Thomas Barkin and Jeffrey Schmid.

Traders raise their bets on Fed interest rate cuts after weaker data on US jobs and PMI. Markets will take more cues from the US Consumer Price Index (CPI) inflation report for July, which could help determine whether the US central bank lowers borrowing costs next month.

The headline CPI is forecast to show an increase of 2.8% YoY in July, while the core CPI is projected to show a rise of 3.0% YoY during the same report period. In case of a softer-than-expected outcome, this could prompt the Fed rate cut expectation and drag the DXY lower. 

Money market traders are now pricing in around a 90% possibility of a rate cut in the September meeting, while 58 basis points (bps) of reduction are priced in by year-end, implying two quarter-point cuts and around a one-in-three chance of a third.

Positive developments from the US-China trade truce fail to boost the index. US President Donald Trump announced late Monday to delay implementing sweeping tariffs on China, extending another 90 days just hours before the last agreement between the world's two largest economies was due to expire. 

China's Commerce Ministry said early Tuesday that the officials will suspend adding some US firms to the unreliable entity list for 90 days. The ministry further stated that the country will also suspend adding some US firms to the export control list for 90 days.