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The US Dollar is experiencing a notable pullback for the second consecutive day, as evidenced by the decline in the trade-weighted US Dollar Index (DXY). Political turbulence has been a key driver of USD depreciation. High-profile figures such as Nancy Pelosi and George Clooney have publicly urged President Joe Biden to step aside in the upcoming election. This political discourse introduces a layer of uncertainty to the market, casting doubt on the current administration's future and, by extension, the stability of the USD:

Adding to the downward pressure, Federal Reserve Chair Jerome Powell's recent Congressional testimony has signaled progress on the disinflation front. While Powell stopped short of declaring a definitive victory over inflation, his remarks reassured markets of the Fed's commitment to achieving price stability. This cautious optimism has led to speculation about potential interest rate cuts, further dampening the USD's appeal.

All eyes are now on the US CPI report, a pivotal indicator that could shape the Fed's future policy trajectory. Economists anticipate a modest increase in core inflation, projected at 0.2% month-over-month and 3.4% year-over-year. The headline inflation rate is expected to decelerate to 3.1% annually, with a slight 0.1% monthly uptick. Such figures would underscore the disinflationary trend and potentially pave the way for a rate cut in September, a scenario that traders are keenly monitoring.

Moreover, the weekly Jobless Claims data is another critical piece of the puzzle. Initial claims are forecast to slightly decline to 236K  from the previous 238K, while continuing claims are expected to edge up to 1860K from 1858K.

Another major European currency, the Pound Sterling, is making impressive strides, rallying to near 1.2870 against the USD during Thursday's London session. This surge is underpinned by strong economic data, which reported a robust 0.4% economic expansion, surpassing the forecasted 0.2% growth:

Industrial and Manufacturing Production figures also paint a positive picture. Monthly growth rates for Industrial and Manufacturing Production hit 0.2% and 0.4%, respectively, aligning with expectations. However, annual growth rates, while positive, fell short of estimates, with Industrial Production growing at 0.4% and Manufacturing Production at 0.6%.

The Bank of England has added further support to the GBP with its hawkish tone. BoE policymaker Catherine Mann emphasized that the path to achieving the 2% inflation target is still fraught with challenges, warning of potential upticks in price pressures. Her stance suggests that the BoE is not yet ready to ease monetary policy, which is likely to bolster the GBP further as markets anticipate sustained rate hikes or at least a prolonged period of elevated rates. 

Meanwhile, equity markets are gearing up for the earnings season, with notable companies like PepsiCo and Delta set to report before the opening bell. While equities in Asia and Europe have shown solid gains, US futures are trailing slightly, reflecting a cautious investor sentiment ahead of the US CPI release.