US Dollar Price Forecast: DXY Dips on Tariff Risk – Are GBP/USD & EUR/USD Set to Fly?

The U.S. dollar has entered a fragile phase as markets digest renewed concerns over trade tariffs, slowing economic momentum, and shifting central bank expectations. The U.S. Dollar Index (DXY), which measures the greenback against a basket of major currencies, has recently slipped toward the 97.5 zone, signaling a cautious tone among investors.

With the dollar losing some of its traditional safe-haven appeal, attention has turned to rival currencies — particularly the euro (EUR/USD) and British pound (GBP/USD). Could this be the beginning of a sustained rally for both? Or is the dollar simply pausing before another rebound?

Let’s break down the forces shaping the market and what lies ahead.

Why Is the Dollar Under Pressure?

The primary driver behind the dollar’s weakness is tariff risk and policy uncertainty. Recent legal and political debates over trade measures have reintroduced volatility into global markets. When investors struggle to price in the economic impact of tariffs, confidence in the U.S. outlook tends to soften.

Tariffs matter because they:

Increase costs for businesses and consumers.

Threaten global trade growth.

Create inflation uncertainty.

Push investors away from predictable assets.

Traditionally, the dollar benefits during times of global stress. However, persistent trade unpredictability has weakened its role as a default refuge. Instead of flocking to the greenback, many investors are now diversifying into other major currencies and commodities.

This shift explains why the DXY has struggled to hold above the 98.0–98.5 area and continues to drift lower on risk-sensitive headlines.

The Role of Monetary Policy

Another crucial piece of the puzzle is central bank policy. The stance of the Federal Reserve remains a key support pillar for the dollar. While inflation has eased from its peak, U.S. interest rates are still relatively high compared to Europe and the UK.

However, markets are increasingly betting that:

Rate cuts could arrive sooner than expected if economic growth slows.

Yield advantages supporting the dollar could narrow.

Capital flows may rotate into currencies with improving outlooks.

As long as the Fed signals patience and data dependency, the dollar may avoid a sharp collapse. Still, even small changes in expectations can move FX markets quickly — and recent price action shows traders preparing for more downside risk.

EUR/USD: Is the Euro Ready to Break Higher?

The EUR/USD pair has shown growing strength as the dollar softens. Recently, the euro has hovered in the 1.1750–1.1830 range, a zone that traders see as critical resistance.

If the euro breaks convincingly above 1.1835, technical momentum could carry it toward 1.19 and potentially 1.20–1.21 in the weeks ahead.

Supporting factors for the euro include:

Reduced dollar dominance due to tariff uncertainty.

Stabilizing eurozone inflation.

Investor appetite for diversification away from U.S. assets.

Still, risks remain. The European Central Bank has been cautious in its policy messaging. Any signal of aggressive rate cuts could stall the euro’s advance. Additionally, weaker economic data from Germany or France could drag EUR/USD back into consolidation.

For now, the euro appears to be “testing the waters” rather than launching into a full rally — but the bias is slowly turning upward.

GBP/USD: A Pound Caught in the Middle

The British pound tells a more complicated story. GBP/USD is currently trading near 1.35–1.3565, stuck between two opposing forces:

A weakening U.S. dollar that favors upside.

Expectations that the Bank of England may cut interest rates earlier than the Fed.

This tug-of-war has kept sterling in a sideways pattern. Resistance lies near 1.3615–1.3665, while support is clustered around 1.3470–1.3435.

What could push GBP/USD higher?

Slower UK inflation decline than expected.

Strong labor market data.

A broad-based dollar selloff.

What could limit gains?

Faster BoE rate cuts.

Sluggish UK growth.

Risk-off sentiment returning to markets.

In short, the pound has upside potential, but it is more vulnerable to domestic economic shifts than the euro.

Wider Market Impact

Tariff uncertainty does not affect currencies alone. It spills over into:

Equity markets, which react sharply to trade headlines.

Gold and the Japanese yen, which benefit during periods of fear.

Emerging market currencies, which may gain when the dollar weakens.

This interconnectedness means that FX traders must track not just economic data but also political developments. A single announcement on trade policy can move the DXY and major pairs within minutes.

Forecast Outlook

US Dollar (DXY)

Likely to trade in the 97.4–98.2 range in the near term.

Vulnerable to further dips if tariff risks persist.

Could rebound if U.S. data surprises to the upside.

EUR/USD

Bullish bias building above 1.18.

A breakout may target 1.19–1.21.

Dependent on ECB policy tone and eurozone data.

GBP/USD

Rangebound between 1.3450–1.3665.

Break above resistance would signal a stronger rally.

Sensitive to UK inflation and BoE decisions.

Key Risks to Watch

Inflation data from the U.S., UK, and eurozone.

Central bank guidance and interest rate expectations.

Trade policy announcements and legal developments.

Global geopolitical tensions.

Final Thoughts

The dollar’s recent dip reflects a world growing uneasy with trade uncertainty and policy unpredictability. While this has created an opening for EUR/USD and GBP/USD to rise, neither pair is free from risk.

The euro looks closer to a breakout, while the pound remains caught between supportive dollar weakness and domestic rate-cut fears. Until clarity returns on tariffs and central bank direction, markets are likely to remain volatile.

In this environment, one thing is clear: the next major move in FX will not come from technicals alone — it will come from headlines, policy decisions, and how investors interpret the future of global trade.