DOLLAR INDEX DXY FORECAST 2025, 2026, 2027 2029

But soft data in the US has, so far, shown worrying signs while European sentiment has been surprisingly resilient. This is partly related to non-tariff issues like federal spending cuts and concerns of a weakening labor market. But tariff policy is also part of the uncertain policy mix, which is contributing to the shakier US economic outlook. Investor focus will now shift to Friday’s US personal consumption expenditures price index, the Fed’s preferred measure of inflation, and next week’s nonfarm payrolls report. A tick higher in inflation or a stronger US labor market report is unlikely to take the Federal Reserve’s expected September rate cut off the table, in our view.

US Dollar Trading Strategies to consider

Serving the world’s largest corporate clients and institutional investors, we support the entire investment cycle with market-leading research, analytics, execution and investor services. Experienced forex traders often blend technical analysis and fundamental analysis to guide their trading decisions. Below, we outline key forex trading strategies to help you choose the one that aligns best with your trading goals and risk tolerance.

​The Commodity Futures Trading Commission’s (CFTC) Commitment of Traders report reveals US dollar positioning versus G10 currencies at its highest since July 2024, suggesting a possible near-term consolidation. ​President-elect Trump’s recent signals point towards imminent trade restrictions, though US policymakers currently view any inflationary impact as transitory. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you’re a beginner or an expert, find the right partner to navigate the dynamic Forex market.

EUR/USD forecast: Will USD strengthen against the euro?

Traders should monitor upcoming economic indicators, particularly employment data, as well as central bank commentary, which will heavily influence the dollar’s direction in the coming weeks. Overall, the greenback is likely to trade within a range, with downside risks balanced by strong economic fundamentals. Looking ahead, the U.S. dollar may face short-term headwinds due to the Fed’s dovish outlook and expectations of continued rate cuts through 2024. However, with robust labor market data and rising Treasury yields, the dollar could remain resilient in the near term. The U.S. dollar is trading mixed on Thursday after an initial decline, following the Federal Reserve’s decision to cut interest rates by 50 basis points. Despite early weakness, the dollar rebounded sharply as Treasury yields rose, driven by stronger-than-expected weekly jobless claims data.

Pound Sterling FAQs

Next week’s spotlight will be firmly on the Federal Reserve, with the FOMC set to meet amid broad expectations that policymakers will keep rates unchanged. April’s solid Nonfarm Payrolls report has reinforced the Fed’s wait-and-see stance, reducing the likelihood of any immediate policy shifts. The Greenback managed to temporarily shrug off some fears of stagflation in the last few days, where weak growth meets persistent inflation, lending fresh oxygen to investor sentiment. A mix of tariff-induced drag, slowing domestic momentum, and softening confidence has been fueling the Greenback’s decline lately.

Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

Solana tops $185 as SOL pairs dominate private DEXs and meme coin trading

This resurgence is expected to stem from potential mitigating factors and a deceleration in U.S. economic momentum. Markets’ expectations for a shallower path of Federal Reserve rate cuts also look overdone to us—we forecast 125 basis points of additional US rate cuts by the end of next year, as opposed to the 72bps priced as of today. So, we think the US dollar has scope to correct this overshoot by declining. By contrast, the market expectation for 146bps of European Central Bank easing by the end of next year looks too aggressive compared to our expectation for 125bps of rate cuts.

Fiscal policies, particularly those resulting from political developments, are expected to impact the USD. For instance, certain policy scenarios could lead to higher fiscal deficits, potentially exerting upward pressure on bond yields. Treasury yield could reach 5% by 2026, reflecting concerns over fiscal sustainability and its implications for the USD. Elsewhere, ING projects that the USD will maintain its strength through 2025, supported by the Federal Reserve’s measured approach to rate adjustments, robust economic growth, and global trade developments. kvb forex However, persistent inflation and geopolitical uncertainties could introduce volatility into currency markets.

Markets may be erring by comparing the president-elect’s prior policies to today. Unlike 2017, the current US economic environment features the Fed cutting rates and a higher US debt burden, which has implications for long-term funding costs and the market’s appetite for US Treasuries. President Trump’s proposed second-term beaxy exchange review policies may widen the twin deficits, undermining the dollar’s long-term fundamentals and reversing some of the recent gains. The USD is the world’s primary reserve currency, meaning central banks hold large reserves of it.

• What could cause the dollar to break out of its tight range are clearer signs of a macro divergence.
• You don’t like paying 6 percent on your mortgage, but you’d dislike it even more if you were paying 7 percent.
• So there’s quite an appetite, particularly in Asia, to reduce the dollar’s grip.

​A likely 25 basis point cut in December may be followed by a more data-dependent legacy fx review approach in 2025, potentially supporting continued dollar strength. However, the labor market remained relatively firm in April, as the US economy added more jobs than previously estimated (+177K), while the jobless rate held steady at 4.2%. The caveat, however, is that these figures do not yet reflect the impact of tariffs imposed after “Liberation Day”, a development market participants will likely assess more fully in upcoming data releases. Adding to the pressure, consumer inflation expectations have ticked higher. The New York Fed’s latest survey shows Americans expect prices to rise 3.6% over the next year, up from 3.1% in February—the highest level since October 2023. Longer-term expectations, however, remain stable, suggesting confidence in the Fed’s longer-run credibility.

In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.

• So although Connally was saying “It’s your problem,” the resulting inflation proved a disaster for the U.S., too.
• “The Fed’s decision was quite dovish, which aligns with a near-term rebound in risk assets and potential dollar weakness,” noted Lefteris Farmakis, forex strategist at Barclays.
• Traders recalibrated for fewer near-term adjustments, keeping the greenback well-supported.
• All eyes now turn to next week’s flash PMIs and speeches from Fed officials for clues on what comes next.
• During wartime, for example, central banks are commonly made subservient to the government.

INFLUENTIAL ORGANIZATIONS AND ECONOMIC DATA FOR THE US DOLLAR INDEX

Connally’s remark captures the arrogance of American leaders that foreign leaders so often feel. I feel our role in the world comes with responsibility, and we should recognize that. You don’t like paying 6 percent on your mortgage, but you’d dislike it even more if you were paying 7 percent.

Say, for example, that the Bank of England and ECB cut rates later this year but the Fed holds off and defers any cuts because its data set is less cooperative. That’s a scenario that could break us out of recent ranges and push the dollar even stronger than it is now and in our forecasts. Actually, there is a fair amount of interest in the carry trade right now. High US rates mean it’s probably not the most ideal environment for earning carry — it’s often described as picking up pennies in front of a steam roller. There are a range of flavors for how to get carry, depending on an investor’s appetite for risk.

Federal Reserve Chairman Jerome Powell wouldn’t get pushed aside out of the blue. During wartime, for example, central banks are commonly made subservient to the government. So, we retain a bias for investors to consider using periods of dollar strength to reduce exposure. Strategies include hedging dollar assets, switching cash and fixed income exposure to other currencies, and selling the risk of further USD strength through options as a means of generating yield.

The Office for Budget Responsibility (OBR) has highlighted challenges such as low economic growth and higher borrowing costs, which have eliminated the government’s available fiscal headroom of £9.9 billion. A recent surge in borrowing costs as a result of rising yields suggests that Chancellor Rachel Reeves may need to consider spending cuts or tax increases to adhere to fiscal rules. In the case of tariffs on so-called critical imports, which are hard to substitute, increased foreign pricing power means that US terms of trade may need to adjust via higher import costs. That means the dollar should depreciate, rather than the foreign currency.

QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions.

You must make your own independent decisions regarding any securities, financial instruments or strategies mentioned or related to the information herein. Periodic updates may be provided on companies, issuers or industries based on specific developments or announcements, market conditions or any other publicly available information. However, J.P. Morgan may be restricted from updating information contained in this communication for regulatory or other reasons. Clients should contact analysts and execute transactions through a J.P.