USD Forecast 2026: Dollar Prediction and Outlook for the Next 6 Months

Most dollar forecasts written this summer assumed the Federal Reserve’s next move was down. Over the last fortnight that assumption has broken. This is Cambridge Currencies’ revised view on the dollar through to February 2027, rebuilt around the July inflation data and Warsh’s first Jackson Hole speech as Chair.

This page covers the rest of 2026 and the turn into next year. For the full calendar year ahead, see our separate US dollar forecast for 2027.

USD forecast 2026 at a glance

Will the US dollar go up or down in 2026?

The dollar is more likely to hold its ground into the fourth quarter than to fall, and the risk of a move higher is now greater than it was in July. Cambridge Currencies has raised the top of its six-month DXY range from 101 to 102, and lifted the floor from 94 to 95.

A dollar forecast is really a forecast of where US interest rates go relative to everyone else’s. Through the first half of 2026 the market assumed the Federal Reserve’s next move was a cut; it now prices the opposite as marginally more likely for September. That does not make a sustained rally the base case — it makes the path two-sided in a way it has not been all year, which is why the ranges below are wide and why the calendar matters more than the trend.

Why is the US dollar rising again in August 2026?

Because the inflation measure the Federal Reserve actually targets is running far hotter than the one most commentary quotes. This is the single most overlooked fact in the current dollar debate, and it explains almost the entire move.

US headline CPI for July came in at 3.4%, with core CPI — stripping out food and energy — at just 2.5%. Read on its own, that looks like an inflation problem that is almost solved, and it is why so much August commentary concluded the Fed was close to easing.

But the Federal Reserve does not target CPI. It targets the PCE price index, and the July PCE data released on 26 August put headline PCE at 3.7% and core PCE at 3.3%. Core PCE is therefore running 0.8 percentage points above core CPI. The two measures weight housing, healthcare and financial services differently, and on this occasion the gap runs in the opposite direction to the one most readers assume.

Anyone forecasting from the 2.5% core CPI figure was working from a number 0.8 points below the one on the table in front of the committee. That is the gap between the consensus written in early August and what the Fed signalled at the end of it. The dollar index fell to 98.55 on 22 August, its lowest since mid-May, then recovered above 99 the following week as that repricing worked through.

What did the Fed say at Jackson Hole, and what does it mean for the dollar?

Kevin Warsh, who succeeded Jerome Powell as Federal Reserve Chair in May 2026, used his first Jackson Hole keynote on 28 August to deliver a markedly more hawkish message than markets expected.

Three points from the speech moved the dollar. He characterised financial conditions as still relatively loose. He observed that more than half of the goods and services the Fed tracks are rising at 3% or more annually. And he indicated he does not expect inflation to return to the 2% target on its own, framing the pressure as structural rather than a passing energy shock.

Market-implied odds of a September increase moved from roughly 35% before the speech to about 55% after it, on CME FedWatch pricing. Sterling fell close to half a percent on the day, easing to around 1.35 from six-month highs above 1.3670 earlier in the month.

This was not a one-man shift. The 28–29 July FOMC held rates at 3.50–3.75% on a 9–3 vote, with Beth Hammack, Neel Kashkari and Lorie Logan all voting for an immediate 25 basis point increase. The minutes recorded that price increases were “broad based, spanning various categories of goods and services”, and that tightening “would likely be necessary if inflation did not decline”. Three dissenting hawks and a Chair who agrees with them is a materially different committee from the one most 2026 forecasts were built on.

Will the Federal Reserve raise interest rates in September 2026?

It is close to a coin flip. The FOMC meets on 15–16 September 2026, with the decision announced on 16 September, and CME FedWatch pricing puts the chance of a 25 basis point rise at roughly 55%. Two data releases land first and both could settle it:

• August non-farm payrolls, Friday 4 September. July payrolls fell by 23,000, and May and June were revised down by a combined 103,000. A second negative month would make a hike very hard to justify.
• August CPI, Friday 11 September. A core reading that holds or rises tips the balance the other way.

One argument for easing weakened in the final week of August. The BLS preliminary annual benchmark revision, published on 28 August, cut total non-farm employment for March 2026 by 79,000 — 0.1% of the total. The labour market is soft, but that revision did not show it falling apart.

Our next Federal Reserve interest rate decision page carries the current policy rate, the vote split and the confirmed meeting dates as they change.

USD forecast for the next 6 months: month-by-month ranges

These are the illustrative ranges Cambridge Currencies is working to through to February 2027. The top of each DXY range reflects a September hike followed by a hold; the bottom reflects the labour market deteriorating fast enough to take a hike off the table. GBP/USD and EUR/USD broadly move the opposite way to the DXY.

Illustrative Cambridge Currencies ranges based on market pricing and the current rate path. They are not guarantees, and rates may move either way.

Each pair has a page of its own with the detail behind it. Our US Dollar Index forecast covers the DXY specifically, the pound to dollar forecast covers cable in full, and the euro to dollar forecast covers the pair that carries the heaviest weight in the index. For the week-by-week view, see the currency forecast hub.

What do the major banks forecast for the dollar in 2026?

The forecasting community is unusually split, and the split is about the Federal Reserve rather than about the dollar itself. Note that the most hawkish voice in the table is the committee’s own minutes.

Note what the disagreement is not about. No major forecaster has a base case for a dollar collapse or a return to the 2022 highs. The debate is over whether the Fed’s next 25 basis points goes up or down, and the whole plausible dollar range for the next six months sits inside seven index points.

Will the US dollar recover or get stronger in 2026?

The dollar has already recovered part of its August decline, and a September hike could extend that — but a sustained move above the DXY 102 area would need more than one rate rise.

Sustained strength would need three things: US inflation holding above 3% on the PCE measure into the fourth quarter, the labour market stabilising rather than shedding jobs, and the Bank of England and ECB standing still while the Fed moves. The first is plausible. The second is not currently happening. The third is unlikely.

That last point is the one most dollar forecasts miss. The Bank of England held Bank Rate at 3.75% on 30 July in a 6–3 vote, with three members voting for a rise to 4.00% — structurally the same split as the Fed’s 9–3. The ECB has already moved, raising its deposit rate by 25 basis points to 2.25% in June. If the Fed moves and the others follow, the interest rate differential that drives the dollar barely changes, and neither does the exchange rate.

GBP/USD forecast: what a hawkish Fed means for the pound

Sterling reached six-month highs above 1.3670 in August before retreating to around 1.35 after Jackson Hole. Check the live GBP to USD rate before acting on any range in this article.

The structural support for cable is that the dollar’s interest rate advantage over the pound has effectively closed: Bank Rate at 3.75% sits at the top of the Fed’s 3.50–3.75% target range. That is why GBP/USD has spent this year in the mid-1.30s rather than the mid-1.20s, and it is more durable than any single data print.

The near-term risk is a timing mismatch. The Fed decides on 16 September and the Bank of England on 17 September, one day apart. If the Fed hikes and the Bank holds, cable could test the lower end of our September range quickly. The next Bank of England interest rate decision page tracks that vote.

EUR/USD forecast: the euro’s narrowing gap with the dollar

EUR/USD reached a three-month high of 1.1710 on 20 August before easing back toward 1.1600 at the end of the month. The euro carries by far the heaviest weight in the dollar index, so EUR/USD and the DXY are close to mirror images.

The ECB’s June projections put eurozone headline inflation at 3.0% for 2026, easing to 2.3% in 2027, with growth of just 0.8% this year. Inflation above target and weak growth is why the ECB has moved slowly, and why the euro’s rate gap with the dollar remains wide at 2.25% against 3.50–3.75%.

Is the US dollar going to crash in 2026?

No forecaster on the table above has a crash as a base case, and a hawkish Fed makes it less likely, not more. The realistic debate is over a gradual decline as rate support eventually fades, and that has now been pushed further out. The dollar remains the world’s dominant reserve currency and the deepest source of global liquidity, which limits how far and how fast it can move in either direction — hence a plausible six-month range of seven index points rather than twenty.

What does the dollar forecast mean for your transfer?

On a large transfer, the dollar’s direction is worth more than any fee you will ever be quoted. Take a buyer converting sterling into $200,000:

A five-cent move either way is worth over £5,000 on a $200,000 purchase; a 2% move on a $500,000 purchase is roughly £7,400. Set against that, the spread you pay is the part you can control. High street banks typically build in a 3–4% margin on the interbank rate, while a specialist broker generally works on 0.2–1%.

This applies whether you are moving to the USA from the UK, paying US suppliers in dollars, or sending money to the USA. If you are receiving dollars rather than buying them, the live USD to GBP rate is the one to watch.

How to manage dollar risk before the September Fed decision

With a genuine coin flip on 16 September, the useful question is not where the dollar lands but how much of that outcome you need to be exposed to.

• Fix the rate. A forward contract locks today’s rate for a future date, up to twelve months out, usually against a deposit. It removes the outcome from the equation — and removes the upside with it.
• Target a better rate. A limit order executes automatically if the market reaches a level you set, so you do not have to watch it.
• Split the amount. Converting in tranches across several months averages your rate. It guarantees you will not get the best rate — and guarantees you will not get the worst.

Which combination fits depends on how firm your deadline is and how much variance your budget can absorb. The costliest mistake we see is not mistiming the market — it is holding out for a rate that never arrives while a deadline closes in. Our guide on whether to buy US dollars now works through that decision.

Frequently asked questions

What is the US dollar forecast for the next 6 months?

Cambridge Currencies expects the dollar index to trade between 95 and 102 over the next six months, with September’s Federal Reserve decision the pivot. On that basis GBP/USD could hold a 1.32–1.40 range and EUR/USD 1.14–1.21. The main risk to a softer dollar is a September rate hike; the main risk to a firmer one is a second consecutive fall in US payrolls.

What is the USD prediction for 2026?

Our USD prediction for the rest of 2026 is a dollar index between 96 and 102, ending the year in the upper half of that band if the Federal Reserve raises rates in September. That points to GBP/USD around 1.32–1.39 and EUR/USD around 1.14–1.20 by December. Ranges are illustrative and rates may move either way.

Will the US dollar get stronger in 2026?

The dollar has strengthened since 22 August, when the index touched 98.55, and could firm further if the Federal Reserve raises rates on 16 September. Sustained strength beyond that would need US inflation to stay above 3% on the PCE measure while the Bank of England and ECB stand still. Both of those central banks have hawkish factions of their own, which limits how far the dollar can pull ahead.

Will the US dollar recover in 2026?

It has partly recovered already. The dollar index fell to 98.55 on 22 August, its lowest since mid-May, and was back near 99.7 by 30 August after Federal Reserve Chair Kevin Warsh signalled at Jackson Hole that rates could still rise. A fuller recovery toward 102 depends on the September decision and on the August inflation data released on 11 September.

Will the Fed cut or raise interest rates in September 2026?

Markets price roughly a 55% chance of a 25 basis point increase at the 15–16 September FOMC, up from about 35% before Jackson Hole. A cut is not currently priced. Three members already voted for a hike at the July meeting, which the committee held at 3.50–3.75% on a 9–3 vote.

Why is US core PCE inflation higher than core CPI?

In the year to July 2026, US core PCE was 3.3% while core CPI was 2.5% — a gap of 0.8 percentage points. The two indices weight categories such as housing, healthcare and financial services differently and draw on partly different data. The distinction matters for currency markets because the Federal Reserve’s 2% target is set against PCE, not CPI, so PCE is the number that drives policy and therefore the dollar.

What is the DXY dollar index outlook for 2026?

The US Dollar Index is forecast between 95 and 102 over the next six months, with the upper half of that band more likely if the Federal Reserve raises rates in September. The index measures the dollar against six currencies, with the euro carrying by far the heaviest weight, so its direction is largely a story about US rates relative to the eurozone.

Should I buy US dollars now or wait?

That depends on your deadline rather than on the forecast. Markets price expected decisions in advance, so waiting for a scheduled Fed meeting often means the move has already happened. If you have a fixed commitment, fixing the rate with a forward contract removes the uncertainty; if your timing is flexible, a limit order or splitting the amount into tranches spreads the risk. A specialist can talk through which fits your situation.

Have a dollar payment landing around the September Fed decision? Talk it through with a Cambridge Currencies specialist. Whether you are settling a US property purchase, paying a dollar invoice or bringing sale proceeds back to sterling, request a free quote and we will look at the timing with you. Every transfer is handled by phone with a dedicated specialist who knows your deadline and watches the market on your behalf — not an app that leaves you to work it out alone. Cambridge Currencies operates through FCA-authorised partners, Currencycloud and ScioPay.

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