US Dollar Forecast: DXY Slips Despite Strong Jobs Report as Fed Outlook Shifts

Dollar Index Slips Despite Strong Jobs Report, Eyes on Fed and Tariffs

The U.S. Dollar Index (DXY) edged lower on Friday, trimming earlier losses after April’s nonfarm payrolls data beat expectations. While the stronger labor market print helped the greenback recover slightly against the euro and yen, the broader downtrend remained intact as traders recalibrated Fed rate cut expectations and weighed the looming impact of tariffs on U.S. growth.

At 14:19 GMT, the DXY is trading 99.539, down 0.638 or -0.64%.

Labor Market Outpaces Forecasts, But Tariff Risks Loom

April’s nonfarm payrolls rose by 177,000, outperforming consensus estimates of 130,000 but down from a downwardly revised 185,000 in March. The unemployment rate held steady at 4.2%, reinforcing a stable employment backdrop. However, analysts cautioned that the data did not yet reflect the economic drag from U.S. tariffs imposed on April 2, with potential downside in job creation expected in coming months.

Jeff Schulze of ClearBridge Investments noted that the timing of the data collection—just after tariffs were introduced—means the report may represent a “calm before the storm.” Traders appeared to share that sentiment, with DXY failing to sustain gains despite the headline beat.

Fed Rate Cut Bets Eased Slightly After Payrolls

Following the jobs release, U.S. rate futures trimmed the probability of a June rate cut to 50%, down from around 60% earlier in the week. Markets are now pricing in about 85 basis points of Fed easing for the year, down from 100 bps previously. Treasury yields moved higher, with the 10-year note rising over 4 basis points to 4.273% and the 2-year yield climbing to 3.754%.

These moves indicate reduced urgency for immediate policy easing, but traders remain cautious given the unresolved tariff situation and its potential drag on economic momentum.

Dollar Index Technical Outlook Remains Fragile

From a technical perspective, DXY remains under pressure, currently holding above a minor pivot at 99.148. A breach of the 98.901 support could accelerate losses toward 97.921. Conversely, a breakout above 100.375 would signal renewed buying interest, with 101.302 as the next upside target.

Despite Friday’s intraday recovery, the dollar’s broader weakness following its April three-year low suggests limited upside unless new catalysts emerge.

Market Forecast: DXY Eyes Fed and Trade Clarity for Direction

With rate cut bets cooling and April jobs data temporarily bolstering sentiment, DXY could attempt to build a short-term base above 99.00. However, the unresolved U.S.-China tariff dispute and its delayed economic impact remain key downside risks. Until clearer signals emerge from the Fed’s upcoming meeting or trade developments, DXY is likely to trade cautiously within its current range.

More Information in our Economic Calendar.