US Dollar Forecast: Will DXY Recapture 99.443? NFP Surprise Fuels Late-Week Rally

U.S. Dollar Finds Support on Strong Jobs Data but Faces Weekly Decline

The U.S. Dollar Index (DXY) is trading higher on Friday following a better-than-expected U.S. non-farm payrolls report, which reinforced expectations that the Federal Reserve will hold interest rates steady at its upcoming meeting. However, the index remains marginally down for the week, with traders watching the 99.443 level as a key threshold. A close above it would flip the DXY positive for the week.

At 14:18 GMT, the U.S. Dollar Index (DXY) is trading 99.149, up 0.437 or +0.44%.

Fed Policy Outlook Firm After Jobs Beat Expectations

Nonfarm payrolls rose by 139,000 in May, beating the Dow Jones forecast of 125,000. The unemployment rate held steady at 4.2%, and treasury yields pushed higher in response—10-year yields rose to 4.434%, while 2-year and 30-year yields added about 4 and 3 basis points respectively. The jobs data offered the Fed room to maintain its current policy stance, with Fed funds futures now pricing in a 97% chance that rates remain unchanged at the June meeting.

Goldman Sachs’ Lindsay Rosner noted that the Fed remains focused on inflation risks and the jobs report does little to shift their patient stance. Still, political pressure looms—President Trump again called for a full-point rate cut despite the strong data, arguing it would lower borrowing costs on national debt and boost economic performance.

Dollar’s Weekly Loss Reflects Broader Economic Concerns

Despite Friday’s uptick, the dollar is on pace for a 0.5% weekly loss. A string of weak economic indicators earlier in the week—blamed in part on the lingering effects of trade tariffs—cast doubt on the broader growth outlook. Limited progress on trade talks has also weighed on sentiment, with traders scaling back aggressive positioning ahead of key events.

Currencies largely held within recent ranges in early European trading. The euro eased slightly to $1.1422 after a rally driven by hawkish ECB commentary. Meanwhile, sterling retraced from recent highs, dipping 0.2% to $1.3546. The yen traded lower at 143.90 per dollar, as risk appetite showed signs of recovery following news of extended U.S.-China communication.

Tariffs and Trade Still Cloud the Dollar’s Path

While the payrolls report has revived near-term support for the dollar, ongoing concerns about the economic toll of tariffs persist. Traders remain cautious, awaiting further clarity on trade developments and upcoming inflation readings, both of which could alter Fed expectations into the second half of the year.

Dollar Index Outlook: Holding 99.443 Key for Weekly Close

Heading into the close, all eyes are on whether the DXY can reclaim and hold above 99.443. A close above this level would erase the week’s losses and bolster bullish momentum going into next week. However, without fresh trade breakthroughs or stronger economic data, upside may remain limited. The dollar’s direction now hinges on external catalysts beyond Fed policy.

More Information in our Economic Calendar.