Federal Reserve Governor Greg Coogler said he doesn't expect inflation to fall below target, and the dollar index rallied from a 14-month low

Fed Governor Adriana Kugler said Wednesday that she does not expect inflation to fall below the central bank's 2 percent target, noting that while some measures of inflation excluding housing are below target, the target is for headline inflation, which is approaching but still above 2 percent.

"Undertarget inflation is not a fundamental scenario," Coogler said in a speech at Harvard's Kennedy School, adding that Fed policymakers generally expect further rate cuts this year and next, and the timing of the cuts will depend on data.

The dollar tumbled on Tuesday after data showed that U.S. consumer confidence fell by the most in three years in September, due to growing concerns about the labor market. But the dollar index rebounded sharply after falling to a near 14-month low on Wednesday, recovering all of Tuesday's losses to close at 100.92, or about 0.257%. Key support levels and more than one-year lows have appeared to "engulf" bullish bottom signals. There is a chance for a volatile rebound in the dollar in the future market, which may hurt gold prices.

(One-hour chart of the US dollar index)

However,foreign exchange trading platformKarl Schamotta, chief market strategist in Toronto, said: "The shrinking labour market gap, which to some extent reflects supply and demand in the labour market, bodes very badly for the US economy. Markets are interpreting this as a sign that the Fed is likely to cut rates sharply for the second time at its November meeting."

The Federal Reserve last week kicked off a rate-cutting cycle with an outsized 50 basis points in its first move, which Chairperson Jerome Powell said was intended to signal policymakers' commitment to keeping unemployment low as inflation eased.

The main focus of the U.S. economy this week will be the August personal consumption expenditure (PCE) price index released on Friday.