US Dollar Forecast: Trump’s Trade Tariff Comments Shake Markets – GBP/USD and EUR/USD Outlook

Market Overview

The US Dollar faces renewed pressure following weaker-than-expected retail sales data, raising concerns about slowing consumer demand. Retail Sales fell 0.9% in January, far below the expected -0.2%, while Core Retail Sales declined 0.4%, missing the 0.3% forecast. These figures suggest that US consumer spending—a key pillar of economic growth—is weakening, adding uncertainty to the Federal Reserve’s rate path.

Despite this, Federal Reserve Chair Jerome Powell reaffirmed a cautious stance on rate cuts, stating that the central bank is in no rush to lower rates amid lingering inflation concerns. Markets had previously anticipated a rate cut in March, but following recent data, expectations have now shifted toward the second half of 2025.

Investors will closely analyze this week’s FOMC Meeting Minutes to gauge policymakers’ views on inflation and future rate adjustments. Adding to the uncertainty, President Trump is scheduled to speak this week, and traders will be watching for any updates on trade policies or new tariffs.

His recent comments about imposing reciprocal tariffs on US trading partners have sparked fears of potential trade disruptions, which could impact market sentiment and weigh further on the US Dollar.

Forex Week Ahead; Major Events to Watch

This week brings several key economic events that could shape the Dollar’s trajectory.

On February 19, the FOMC Meeting Minutes will be released, providing fresh insights into the Fed’s stance on inflation and interest rates. Unemployment Claims on February 20 are projected to rise slightly to 214K from 213K, signaling potential softening in the labor market.

Meanwhile, the Philly Fed Manufacturing Index, forecasted at 19.4, has seen a sharp decline from the previous 44.3, indicating slowing economic activity.

Energy traders will also keep an eye on Crude Oil Inventories (February 20, 6:00 PM UTC), with expectations of a 4.1M increase, which could influence inflation expectations and commodity-linked currencies.

On February 21, Flash Manufacturing and Services PMI readings will be released, critical indicators of economic expansion or contraction. Additionally, Existing Home Sales data (4:00 PM UTC) is expected to decline to 4.13M from 4.24M, reflecting a cooling housing market. The Revised University of Michigan Consumer Sentiment Index, holding steady at 67.8, will also be monitored for any shifts in consumer confidence.

With economic data signaling cooling demand, uncertainty over Fed rate cuts, and potential trade policy risks, the US Dollar remains at a critical juncture, with traders awaiting this week’s high-impact events for further direction.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $106.708, slightly down by 0.01%, hovering below its pivot point at $107.087. The index remains under pressure, with immediate support at $106.556 and a further downside target at $106.031.

A break below these levels could trigger a deeper selloff as traders reassess the Fed’s policy path and global risk sentiment.

On the upside, resistance stands at $107.512, followed by a stronger barrier at $107.948. The 50-day EMA at $107.607 and 200-day EMA at $107.927 reinforce bearish momentum, capping any recovery attempts.

A move above $107.948 could signal renewed bullish momentum for DXY, while failure to clear this resistance keeps sellers in control.

GBP/USD Technical Analysis

GBP/USD is trading at $1.25970, showing little movement but holding below the key pivot point at $1.26106. This level serves as a crucial barrier for the bulls, and a break above it could fuel a rally toward $1.27220, with further upside potential at $1.28091.

However, a failure to reclaim this level may lead to renewed selling pressure, targeting immediate support at $1.25255, followed by a deeper slide to $1.24553.

Technically, the 50-day EMA at $1.24821 offers dynamic support, while the 200-day EMA at $1.24508 reinforces long-term stability. A downward trendline is acting as resistance, suggesting the pair may remain under pressure unless it decisively clears the pivot.

EUR/USD Technical Forecast

EUR/USD is showing mild upside momentum, trading at $1.04939, up 0.02% on the session. The pair is hovering just above the key pivot level at $1.04825, which serves as a critical inflection point.

A sustained move above this level could push prices toward $1.05342, with further upside targets at $1.05769. However, failure to hold above the pivot could open the door for a decline toward $1.04358, followed by $1.03916.

Technical indicators suggest mixed sentiment. The 50-day EMA at $1.04314 provides short-term support, while the 200-day EMA at $1.03886 reinforces a stronger downside cushion.