The US dollar edged slightly lower on Thursday, weighed down by lower US bond yields and increased expectations for a rate cut by the Fed. At the time of writing, the US dollar index DXY is trading at around 97.07.

Stronger than expected retail sales data had helped the dollar strengthen up to 97.44 on Wednesday, but it gave back some of its gains as Treasury yields declined over weak data from the US housing market and ongoing trade tensions between US and China.

Recent economic data releases from the US have been signaling that the US economy’s health is strong, but the Fed rate cut sentiments continue to dominate. Markets are expecting a 0.25% rate cut during the Fed’s July policy meeting.

On Wednesday, the IMF remarked that the US dollar appeared to be overvalued by as much as 12% on the basis of near-term economic fundamentals, especially because of the US-China trade war. These comments have also caused the dollar to weaken against other major currencies.