The US Dollar Index (DXY) consolidates around 97.70 near a one-week high, with the broader bullish outlook remaining intact.

The US Dollar Index (DXY) is taking a breather after climbing to a more than one-week high in the previous session, trading in a tight range around 97.70 during Thursday’s Asian session and holding steady on the day.

Minutes from the Federal Reserve’s January meeting showed policymakers split over the timing and need for further rate cuts, given lingering inflation concerns. While some officials suggested additional easing could be appropriate if inflation cools as projected, others warned that cutting rates too soon might jeopardize the Fed’s 2% target. The relatively less dovish tone has helped curb expectations for aggressive policy easing and continues to lend support to the US dollar.

The upbeat January Nonfarm Payrolls report released last week has also reinforced the case for a cautious approach from the Fed, further underpinning the greenback. In addition, reports that the US military could be ready to strike Iran as soon as this weekend are keeping geopolitical risks elevated, sustaining demand for the dollar’s safe-haven appeal.

However, markets are still pricing in the likelihood of at least two Fed rate cuts in 2026. Softer US consumer inflation data released last Friday, combined with a generally positive risk tone, has limited stronger bullish momentum in the dollar. Attention now turns to Friday’s US Personal Consumption Expenditure (PCE) Price Index, which may offer fresh direction for the DXY.

Sources: Haresh Menghani