US Dollar Price Forecast: PCE Test Looms as EUR/USD and GBP/USD Hold Firm

Published: August 26, 2026

Key Points

• The upcoming PCE inflation report and Kevin Warsh's speech at Jackson Hole could significantly influence expectations for the Federal Reserve's September policy decisions.
• Concerns regarding U.S. fiscal policy and Treasury market dynamics add uncertainty to the dollar's outlook.
• Stronger expectations for the European Central Bank's (ECB) policy are providing support for the euro.
• The British pound is buoyed by resilient UK economic growth and inflation, despite labor market uncertainties.

Market Overview

As of August 26, the U.S. dollar is experiencing tight trading conditions, primarily due to market anticipation surrounding the July PCE inflation report and the first speech by Fed Chairman Kevin Warsh at Jackson Hole. The prevailing market sentiment leans towards a more hawkish stance regarding a potential pause in rate hikes by the Fed in September. Boston Fed President Collins indicated that interest rates may need to rise unless core inflation, currently at 3.3%, shows a significant decline.

Fiscal policy remains a concern, with Treasury efforts to stabilize long-term yields through bond buyback programs. This has raised questions about the potential for "fiscal dominance" affecting central bank independence, a topic likely to be addressed at Jackson Hole.

Currency Analysis

Euro (EUR)

The euro benefits from a clearer monetary policy outlook, with ECB Executive Board member Schnabel indicating that current policies are too accommodative and that rates need to rise to sustainably meet inflation targets, especially given high energy prices.

Pound Sterling (GBP)

The British pound is influenced by the divergence in monetary policies. Despite high inflation, UK growth has exceeded expectations, preventing aggressive easing from being priced in. Strong labor market conditions suggest that rapid rate hikes could be a viable option.

Technical Analysis

U.S. Dollar Index (DXY)

The DXY is currently at 98.95, remaining within a descending channel. It is below key moving averages, indicating a bearish short-term trend. Resistance levels are at 99.12 and 99.41, while support is found at 98.57 and 98.19. A break above 99.41 could signal a recovery, while a drop below 98.57 would strengthen the bearish outlook.

GBP/USD

The GBP/USD pair is consolidating around 1.3636, just below the resistance zone of 1.3656-1.3676. The pair remains supported by a rising channel, with bullish momentum indicated by the RSI at 54. Key resistance levels are at 1.3656 and 1.3676, while support is at 1.3618.

EUR/USD

The EUR/USD is trading at 1.1671, above the 50-EMA and 100-EMA, maintaining a bullish structure. Immediate resistance is at 1.1678, with support at 1.1658. The outlook remains bullish as long as the price stays above 1.1658.

Conclusion

The primary focus for the market on August 26 is the uncertainty surrounding U.S. inflation and Federal Reserve policy, contrasted with clearer expectations for Eurozone rates. The upcoming PCE report and discussions at Jackson Hole are expected to be pivotal in shaping market sentiment.