US Dollar Forecast: Trump’s Tariff Threats & Fed Stance Drive Volatility – GBP/USD and EUR/USD

Market Overview

The U.S. Dollar Index (DXY) is hovering around 103.30, struggling for direction as weak economic data and rising geopolitical uncertainty dampen sentiment. While the Federal Reserve is expected to maintain its current policy stance at its upcoming meeting, disappointing retail sales figures and renewed tariff threats from former President Donald Trump have raised concerns about the dollar’s near-term trajectory.

Consumer Activity Slows as Retail Sales Miss Expectations

Recent economic data points to weakening consumer activity. The U.S. Census Bureau reported that February retail sales rose just 0.2%, well below the 0.7% forecast, following a -1.2% decline in January (revised from -0.9%). Year-over-year retail sales growth slowed to 3.1%, down from 3.9% in January.

Meanwhile, consumer confidence has deteriorated sharply. The University of Michigan’s Consumer Sentiment Index dropped to 57.9 in March—its lowest level since November 2022—down from 64.7 in February and below the expected 63.1.

Rising inflation concerns also persist, with the five-year Consumer Inflation Expectation jumping to 3.9% from 3.5%, suggesting households anticipate prolonged price pressures.

These weaker retail sales and declining sentiment indicate a slowdown in economic momentum, adding pressure on the U.S. dollar. However, heightened inflation expectations could complicate Federal Reserve policy decisions, potentially delaying rate cuts and limiting the dollar’s downside.

Political Uncertainty and Geopolitical Risks Impact the Dollar

Beyond economic data, political uncertainty is another drag on the U.S. dollar. Reports indicate that former President Donald Trump is planning talks with Russian President Vladimir Putin regarding a potential Ukraine resolution, which could include territorial concessions and control over the Zaporizhzhia nuclear plant.

Additionally, speculation about a shift in U.S. foreign policy under a future Trump administration has created further uncertainty in global markets.

With economic and geopolitical risks mounting, traders are closely watching upcoming Federal Reserve commentary and global developments for further direction on the U.S. dollar’s outlook.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading around $103.286, holding steady as it tests key technical levels. The pivot point at $103.63 remains crucial—staying below it signals bearish pressure, while a breakout above could revive bullish momentum.

The 50-day EMA at $130.98 suggests the index remains under near-term resistance, while the 200-day EMA at $105.75 reinforces a broader downtrend. Immediate resistance sits at $104.29, with a break higher potentially pushing DXY toward $104.92.

On the downside, $103.23 serves as a key support level, with further losses possibly extending toward $102.71.

GBP/USD Technical Analysis

GBP/USD is trading at $1.30022, inching higher as it holds above the key pivot level of $1.29672. The pair maintains its bullish momentum, with support from the 50-day EMA at $1.29107, reinforcing near-term strength. A push above $1.30160 could fuel further gains toward $1.30532, where sellers may re-enter.

On the downside, $1.29084 serves as immediate support, with a break below this level exposing $1.28605, which could shift sentiment to the downside. The broader trend remains constructive as long as GBP/USD holds above $1.29672.

EUR/USD Technical Forecast

The EUR/USD pair is trading near $1.09490, showing slight weakness as it hovers just above its pivot point at $1.09023. The pair has maintained an upward trajectory, supported by the 50-day EMA at $1.08342, reinforcing near-term bullish sentiment.

However, resistance looms at $1.10012, with a break above this level potentially driving the euro toward $1.10686.

On the downside, if EUR/USD slips below $1.09023, it could signal a shift in momentum, exposing support at $1.08303 and deeper levels near $1.07647. The broader trend remains constructive as long as prices stay above the pivot.