US Dollar Price Forecast: Fed Hike Bets Rise as ECB Tightening Supports Euro

Published: September 08, 2026

Author: Arslan Ali

Key Points

• Rising expectations for a Federal Reserve rate hike provide support for the US dollar.
• Upcoming US inflation data is critical for confirming the Fed's tightening stance.
• The Dollar Index (DXY) has struggled to gain momentum despite a hawkish Fed outlook.
• Expectations of tightening from the European Central Bank (ECB) support the euro.

Market Overview

The US dollar is currently facing mixed pressures from a more hawkish Federal Reserve and strengthening currencies globally. A recent employment report has increased the likelihood of a Fed rate hike during the September 15-16 meeting, with a 60% chance now anticipated. However, the dollar's performance has been limited by cross-currency flows and geopolitical tensions, particularly in the Middle East, which have bolstered currencies in the MENA region.

Inflation and ECB Expectations

Inflation concerns are at the forefront as the ECB prepares for its upcoming meeting. Economists widely expect a 25 basis point increase in the deposit rate to 2.50%, driven by rising inflation in the Eurozone, which has reached 3.3%. The ongoing conflict in Iran is contributing to high energy prices, further complicating the inflation landscape.

Bank of England's Position

The Bank of England is also navigating challenges posed by the energy crisis and mixed economic signals. The central bank is likely to consider global bond yields and energy prices in its policy decisions, which could lead to increased volatility in the British pound (GBP).

Technical Analysis

Dollar Index (DXY)

The DXY is currently trading at 98.88, remaining below key moving averages and a descending trendline. The first support level to watch is at 98.71, with resistance at 99.00 and 99.20. A bearish bias is maintained until the price trades above 99.39.

GBP/USD

GBP/USD is trading at 1.3530, having rebounded from support at 1.3477. Resistance is noted at 1.3540, with further levels at 1.3565 and 1.3606. The market is currently neutral, awaiting direction from upcoming economic data.

EUR/USD

EUR/USD is at 1.1613, compressing within a descending triangle. Key resistance levels are at 1.1639, while initial support is at 1.1607. A breakout above 1.1639 could signal a bullish trend, while a drop below 1.1584 would indicate a bearish outlook.

Conclusion

The overall bias for the DXY remains neutral-to-bullish, while the euro is moderately bullish and the GBP is neutral-to-bullish. Market participants are advised to closely monitor upcoming inflation data and central bank decisions, as these will significantly influence currency movements.