US Dollar Forecast: Pullback as Rate Cut Bets Rise on PMI Data – GBP/USD and EUR/USD

Market Overview

The U.S. Dollar Index (DXY) pulled back from a two-day rally on Thursday, hovering near $99.70 after weaker-than-expected economic data and mixed trade policy signals tempered recent gains.

S&P Global PMI: Services Weakness Offsets Manufacturing Uptick

April’s flash S&P Global Composite PMI slipped to 51.2 from 53.5, reflecting a noticeable slowdown in business activity. The Services PMI dropped sharply to 51.4 from 54.4, while Manufacturing edged higher to 50.7, narrowly holding above contraction.

S&P Global’s Chris Williamson cautioned that persistent cost pressures are restraining demand and complicating the Federal Reserve’s policy response. Traders now place a 60% probability on a June rate cut, with as many as three cuts priced in for 2025.

Trade Policy Uncertainty Lingers Despite Diplomatic Engagements

Meanwhile, Treasury Secretary Scott Bessent called the current 145% tariff on Chinese imports and 125% on U.S. goods “unsustainable,” signaling openness to restructuring trade terms.

Though no formal resolution has emerged, the White House confirmed 14 ongoing bilateral talks, with broader discussions involving 34 nations scheduled this week.

Economic Events Ahead

Today’s economic docket could further sway market expectations.

At 12:30 PM ET, jobless claims (forecast: 222K) and durable goods orders (forecast: +2.1%) headline the data flow. Existing home sales (2:00 PM ET), natural gas storage (2:30 PM ET), and remarks from Fed’s Kashkari (9:00 PM ET) round out the session.

While President Trump’s reassurance on Fed leadership has helped stabilize investor sentiment, markets remain sensitive to incoming data and policy clarity. The dollar, commodities, and equities are all poised for potential volatility ahead.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index (DXY) is treading just below the $99.70 mark, consolidating gains after a sharp rally from the $98.10 support earlier this week. Price action has carved out a short-term ascending channel, with the index now testing the $99.54 pivot. If bulls hold this level, the next upside targets are $100.28 and $100.97.

The 50 EMA is turning higher, while the 200 EMA overhead still reflects broader downside momentum. A close above $100.28 would signal renewed bullish intent.

On the flip side, a drop below $98.86 would threaten the uptrend. The market’s tone hinges on how traders digest upcoming U.S. data and Fed speak.

GBP/USD Technical Analysis

The British pound (GBP/USD) is navigating a tight descending channel, trading around $1.3272 after failing to reclaim the $1.3287 pivot. The price is struggling to break above the 50 EMA at $1.3298, while the 200 EMA offers broader trend support near $1.3150.

Momentum remains fragile—buyers need a close above $1.3357 to invalidate the downtrend and retarget $1.3424. On the flip side, failure to hold $1.3205 could drag the pair toward $1.3124.

EUR/USD Technical Forecast

The euro is struggling to reclaim momentum after sliding from the $1.1566 peak. EUR/USD now trades around $1.1340, just beneath the $1.1359 pivot.

Price action remains capped by the 50 EMA at $1.1397, and the descending trendline from last week’s high continues to weigh on recovery attempts.

A sustained move above $1.1397 is needed to shift sentiment bullish, with $1.1422 as the next upside target. On the downside, $1.1300 is key to holding the current structure; a break below opens the door to $1.1269.