• The US Dollar edges lower due to improved risk sentiment ahead of the US PCE inflation release.
• Improved US Treasury yields could provide support for the Greenback.
• Stronger US economic data have reduced the Fed’s rate cut expectations for September.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six other major currencies, retraces its recent gains ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index for June. The DXY trades around 104.30 during the Asian session on Friday.

The downside of the US Dollar could be limited due to improved US Treasury yields. 2-year and 10-year yields on US Treasury bonds stand at 4.35% and 4.24%, respectively, at the time of writing. Stronger US economic data have reduced some rate cut expectations for September, which might provide support for the Greenback.

According to CME Group’s FedWatch Tool, markets now indicate an 88.6% probability of a 25-basis point rate cut at the September Fed meeting, down from 94.0% a week earlier.