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US Dollar Forecast: DXY Slips After GDP Miss and Tariff Uncertainty Shake Markets

By:
James Hyerczyk
Updated: May 29, 2025, 15:58 GMT+00:00

Key Points:

  • U.S. Dollar Index slips to 99.440 as tariff setbacks and weak GDP data spark renewed market uncertainty.
  • Court ruling blocks most of Trump’s tariffs, creating legal ambiguity and limiting dollar strength potential.
  • U.S. GDP shrank 0.2% in Q1 while jobless claims rose more than expected, fueling concern over economic momentum.
US Dollar Index (DXY)

Dollar Softens as Tariff Uncertainty and Economic Data Undermine Support

The U.S. Dollar Index (DXY) turned lower at mid-session Thursday, reversing early gains as legal setbacks to the White House’s tariff plans and soft macro data clouded the currency’s outlook. The DXY is currently trading near 99.440, eyeing immediate resistance at 99.049 and 100.336, with the 50-day moving average still a ceiling at 101.000.

At 11:15 GMT, the U.S. Dollar Index is trading at 99.371, down 0.505 or -0.51%.

Dollar strength faded after the U.S. Court of International Trade blocked most of the administration’s proposed trade levies, challenging the emergency legal basis cited for the tariffs. The White House responded swiftly, filing an appeal while questioning the court’s authority—introducing fresh legal uncertainty. Market participants interpreted the ruling as narrow but significant, raising doubts about the enforceability of broader tariff measures moving forward.

According to Jefferies’ Brad Bechtel, the decision doesn’t completely derail the tariff agenda but narrows its scope, prompting traders to reassess the greenback’s policy tailwinds. Goldman Sachs noted the ruling could modestly temper inflation expectations while reinforcing institutional credibility, potentially boosting broader risk sentiment but reducing immediate support for the dollar against safe havens.

Soft U.S. Economic Data Adds to Downward Pressure

Economic fundamentals added to the bearish tilt. First-quarter GDP contracted 0.2%, and weekly jobless claims rose more than expected. These signals of economic cooling have rekindled concerns about the broader outlook, especially in the context of trade uncertainty and rising fiscal risks.

The Federal Reserve’s cautious stance—holding rates steady in the face of persistent inflation—further limited dollar upside. Policymakers appear increasingly focused on the balance of slowing growth versus elevated prices, leaving DXY traders watching upcoming data closely for rate guidance cues.

FX Crosses Reflect Dollar Pullback—Yen and Euro Gain

The euro gained 0.5% to $1.1349, rebounding from a low of $1.1209 earlier in the session. The dollar also lost ground to the yen, falling 0.28% to 144.42, and slid 0.42% against the Swiss franc to 0.824. These moves underscore the greenback’s vulnerability when market confidence in U.S. policy consistency erodes.

Market Forecast: Capped Recovery Without Clear Policy Anchors

Unless the administration successfully defends its tariff framework or delivers a surprise fiscal breakthrough, DXY upside remains capped below the 101.000 resistance. Short-term moves will hinge on the appeal outcome and upcoming Fed commentary. For now, the index may stay rangebound with bias tilted lower if economic data continues to soften or legal risks around trade policy persist.

More Information in our Economic Calendar.

About the Author

James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.

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