US Dollar Forecast: DXY Rises as Euro Slips on ECB Cut and Lagarde’s Outlook

Dollar Steadies as ECB Cut Underscores Diverging Policy Paths

The U.S. dollar regained ground on Thursday, supported by a fresh interest rate cut from the European Central Bank that reinforced the growing divergence between euro zone and U.S. monetary policy. The Dollar Index (DXY) rose to 99.56, extending its modest rebound off recent lows, as traders recalibrated expectations on both sides of the Atlantic.

At 14:07 GMT, the U.S. Dollar Index (DXY) is trading 99.454, up 0.176 or +0.18%.

ECB Cut Highlights Euro Area Fragility

The ECB delivered a widely anticipated 25 basis point rate cut, lowering its deposit facility to 2.25%—the top of its neutral range. While the move was fully priced in, the messaging from President Christine Lagarde added weight to the dollar’s position. She confirmed unanimous support for the cut and emphasized “exceptional uncertainty” surrounding the euro area’s outlook due to U.S. trade tensions, a strong euro, and declining energy prices.

Lagarde signaled no appetite for aggressive policy action, instead reiterating that decisions will remain “meeting by meeting.” For dollar bulls, this lack of firm guidance pointed to an ECB that remains cautious and reactive, adding to downward pressure on the euro. The EUR/USD pair slipped 0.3% to 1.1368, pulling back from highs near 1.14.

Trade Relief Lifts USD/JPY, Greenback Broadens Rebound

Elsewhere, the dollar gained 0.58% against the yen to 142.64, recovering from a seven-month low, after U.S.-Japan trade talks skirted discussion of foreign exchange policy. That helped unwind long-yen positions, the most extended since 1986, and allowed the dollar to recoup broader losses driven by recent market turbulence.

While the dollar has been under pressure due to tariff-related uncertainty, Thursday’s developments provided a floor. Safe-haven flows into the Swiss franc and euro appear stretched, and the euro’s trade-weighted strength—up 9%—may soon become a headwind for euro zone exporters.

Market Forecast: Dollar Index Positioned for Stabilization

The ECB’s move, coupled with subdued forward guidance and trade-related caution, tilts the scales back in the dollar’s favor in the near term. With the Fed on hold and euro zone easing risks still alive, interest rate differentials are expected to anchor support for the DXY. As euro strength fades and safe-haven demand for non-dollar currencies moderates, the dollar is likely to consolidate gains and could trend higher if risk sentiment continues to stabilize.

More Information in our Economic Calendar.