Six weeks ago the dollar was the strongest it had been in a year and the Federal Reserve was signalling hikes. That story has changed. The labour market has cracked, hike bets have been cut, and sterling is at a one-year high against the dollar. Here is my updated read on where the dollar goes from here — and, more usefully, what it means if you have a dollar payment to make. You can always request a quote and talk it through with a specialist.
Where the dollar stands right now
As at 13 July 2026:
| Measure | Level | Context |
|---|---|---|
| US Dollar Index (DXY) | ~100.9 | Fell 0.52% on the payrolls miss — its biggest one-day drop in two months |
| GBP/USD | ~1.3394 | A one-year high for sterling |
| EUR/USD | ~1.1408 | Still rangebound; the euro is not the driver here |
| Fed funds target | 3.50%–3.75% | Held on 17 June; next decision 29 July |
| US CPI | 4.2% (May) | June print released 14 July — consensus ~3.9% |
The dollar did not weaken because of anything that happened in Washington. It weakened because of one number.
Why the dollar rally stalled: the 57,000 payrolls shock
US non-farm payrolls rose by just 57,000 in June, far below expectations, and May’s figure was revised down from 172,000 to 129,000. That is not a soft patch — that is a labour market losing momentum, and it landed directly on the Fed’s hiking case.
Markets responded immediately. The probability of a hike at the July meeting collapsed; pricing now points to roughly a 65% chance the Fed simply holds on 29 July, with any tightening pushed out to September at the earliest. The dollar fell across the board, Treasury yields eased, and sterling pushed to its highest level against the dollar in a year.
Fed Chair Kevin Warsh has since acknowledged, at the ECB Forum, that moderating inflation expectations have removed the immediate urgency to tighten — a notable softening from the June meeting, where the dot plot showed nine of eighteen officials pencilling in a hike this year and the median 2026 rate marked up to 3.8%.
So the Fed is caught between two data sets pointing in opposite directions: inflation at 4.2% says tighten, a 57,000 payroll print says do not. That tension is the whole story for the dollar over the next quarter.
The 14 July inflation print is the pivot
June US CPI is published on 14 July, and it matters more than the Fed meeting itself — because it largely determines what the Fed does on 29 July.
Consensus expects headline inflation to fall from 4.2% to roughly 3.9%, helped by a near-10% drop in US petrol prices after the Strait of Hormuz reopened. But core inflation is expected to hold around 2.9%. That split is the thing to watch.
A falling headline with sticky core is the most likely outcome, and it is genuinely ambiguous for the dollar: it gives the Fed cover to hold, but not to cut. If core surprises higher, the hiking case comes straight back and the dollar firms. If both soften, the dollar has further to fall.
My dollar forecast for the next six months
My view is that the dollar’s easy gains are behind it, but a collapse is not on the cards while US rates sit 125bp above the UK’s real policy stance and inflation remains near 4%. This is a two-sided market, and I would rather give you an honest range than a false point estimate.
| Pair / Index | Q3 (to end Sept) | Q4 (to end Dec) |
|---|---|---|
| DXY | 97–102 | 95–102 |
| GBP/USD | 1.31–1.37 | 1.30–1.39 |
| EUR/USD | 1.12–1.18 | 1.13–1.20 |
These are Cambridge Currencies’ ranges as at 13 July 2026, based on current market pricing. They are not guarantees and rates may move either way. This page is reviewed every four to eight weeks and around each Fed meeting.
The case for a weaker dollar rests on the labour market. If payrolls stay near 50,000–100,000 and core inflation drifts down, the Fed’s hiking bias evaporates and cuts return to the conversation for 2027. That path takes GBP/USD toward the top of its range.
The case for a firmer dollar rests on inflation. Core has been stuck near 2.9% and the June dot plot still implies a hike. If services inflation reaccelerates, the Fed hikes in September, and the dollar takes back much of what it has lost.
What I would not do is assume the June trend continues in a straight line. The dollar has now wrong-footed the consensus twice this year — first by rallying when banks forecast weakness, then by rolling over just as the hawkish narrative took hold.
Why sterling is at a one-year high
GBP/USD at 1.3394 is only half a dollar story. The other half is that UK political risk has largely resolved. Sir Keir Starmer announced his resignation on 22 June; Andy Burnham has since secured the backing of more than 80% of the Parliamentary Labour Party and is expected to be confirmed as leader on 17 July and take office shortly afterwards. An orderly, uncontested succession has removed the tail risk that was weighing on the pound.
On rates, the Bank of England held Bank Rate at 3.75% on 18 June in a 7–2 vote, and is widely expected to hold again on 30 July. UK CPI is 2.8%, but services inflation at 3.7% is keeping the MPC cautious. A central bank in no hurry to cut is supportive for sterling. Follow it in our next Bank of England interest rate decision update and the wider GBP forecast for 2026.
What this means if you are transferring dollars
If you are buying dollars — paying a US supplier, funding a US property purchase — this is the best level in a year. GBP/USD at 1.3394 versus 1.30 is the difference between $130,000 and $134,000 on a £100,000 conversion. Whether it improves further depends on data nobody has seen yet.
If you are selling dollars — bringing US proceeds home, repatriating salary — the move has gone against you. $200,000 at 1.34 yields about £149,254; at 1.30 it would have yielded about £153,846. That is roughly £4,600 of erosion in a few weeks, on one transfer.
If you have a business with recurring dollar exposure, the sequence of the next three weeks — CPI on 14 July, the Fed on 29 July, the Bank of England on 30 July — is exactly the kind of event cluster that a forward contract exists to neutralise.
Strategy: how to handle a two-sided market
- Forward contract — fixes today’s rate for a date up to twelve months ahead, typically for a deposit of 5–10%. Appropriate when you have a known dollar payment and cannot absorb a 4% swing across three central-bank events.
- Limit order — set a target level and execute automatically if the market reaches it. Useful if you have time and a specific rate in mind.
- Splitting the transfer — converting in tranches across several months averages your rate. It will not maximise your outcome, but it removes the risk of converting the lot on the worst possible day. In a market where the professional consensus has been wrong twice this year, that is not timid — it is reasonable.
The point of these tools is not to beat the market. It is to make sure a move you did not predict does not decide your outcome. See whether to lock in a rate now or wait, and our guide to transferring large amounts internationally. In my experience the most expensive mistake isn’t picking the wrong moment — it is waiting for a perfect rate that never arrives, and missing the thing you were trying to do.
Frequently asked questions
Will the US dollar get stronger or weaker in 2026?
The dollar’s rally has stalled. June payrolls of just 57,000 cut expectations of a Federal Reserve rate hike, and the US Dollar Index has eased to around 100.9. The dollar may weaken further if the labour market keeps softening, but a firm floor remains while US inflation sits near 4%. Our forecast range for the DXY is 95–102 across the rest of 2026.
What is the GBP/USD forecast for the next six months?
GBP/USD is forecast to trade between 1.31 and 1.37 through Q3 2026, and 1.30 to 1.39 in Q4. It currently trades near 1.3394, a one-year high, supported by a softer dollar and the resolution of UK political uncertainty following Sir Keir Starmer’s resignation.
Will the Fed raise rates on 29 July 2026?
Market pricing points to roughly a 65% probability that the Federal Reserve holds the target range at 3.50%–3.75% on 29 July. The weak June payrolls report of 57,000 pushed hike expectations out to September. The June CPI release on 14 July is the key input.
Why did the dollar fall in July 2026?
US non-farm payrolls rose by only 57,000 in June, and May’s figure was revised down to 129,000. The weak labour data cut expectations of a Federal Reserve rate hike, and the US Dollar Index fell 0.52% — its largest one-day drop in two months.
Is now a good time to buy US dollars?
GBP/USD near 1.3394 is the best level for sterling buyers of dollars in a year. Whether it improves further depends on the 14 July inflation print and the 29 July Fed decision, neither of which is knowable in advance. This is general guidance, not a personal recommendation — the right approach depends on your deadline and how much of a swing you can absorb.
What is the US dollar index (DXY) forecast for 2026?
The DXY is forecast to trade broadly between 97 and 102 through Q3 2026, and 95 to 102 in Q4. It sits near 100.9 after easing from its June high. A sustained fall below 97 would likely require the US labour market to keep deteriorating while inflation cools.
Should I fix a dollar rate before the next Fed meeting?
Markets price expected decisions in advance, so waiting for 29 July often means the move has already happened — and three market-moving events land inside three weeks (US CPI on 14 July, the Fed on 29 July, the Bank of England on 30 July). A forward contract fixes today’s rate and removes the need to time any of them.
Speak to a Cambridge Currencies specialist about timing your dollar transfer. Whether you are paying a USD invoice, buying US property, or bringing proceeds back to sterling, request a free quote and we’ll talk it through. Every transfer is handled by phone with a dedicated specialist — a dealer, not an app — who keeps an eye on the market on your behalf. You can also follow the moves in our weekly currency forecast.
Related guides: GBP/USD forecast · Euro forecast · Next Federal Reserve rate decision · What is a forward contract?
