Last updated: 16 August 2026.
The dollar spent the first half of 2026 defying a bearish consensus. It is now giving some of that back — but not for the reason most forecasts assumed. Below is Cambridge Currencies’ updated view on the dollar through the rest of 2026, rebuilt around the two data releases that landed in the second week of August.
This page covers the rest of 2026. For the calendar year ahead, see our separate US dollar forecast for 2027.
What is the US dollar doing right now?
The dollar index is trading just below 100, having softened from the 101 area it held through late July. The Federal Reserve’s H.10 release put sterling at 1.3498 and the euro at 1.1559 against the dollar on 7 August 2026, and both have since edged higher as the dollar eased.
Two releases in August moved the picture, and they pointed in opposite directions.
- The labour market cracked. US non-farm payrolls fell by 23,000 in July, and the Bureau of Labor Statistics revised May and June down by a combined 103,000. The unemployment rate held at 4.1%.
- Inflation stayed above target. Headline CPI ran at 3.4% in the year to July, with prices up just 0.1% on the month. Core inflation — stripping out food and energy — came in at 2.5%.
That combination is why the ranges below are wide. A weakening jobs market argues for lower US rates and a softer dollar. Inflation above target argues for the opposite. For the first time this cycle, the Fed’s two mandates are pulling against each other.
Why is the dollar falling when US inflation is still 3.4%?
Because the part of inflation the Federal Reserve can actually control is already close to target. Headline CPI is 3.4%. Core CPI is 2.5%. The 0.9 percentage point gap between them is almost entirely energy, driven by Middle East supply disruption rather than by US demand.
This distinction is the whole forecast. Interest rates do not change the price of oil. If the committee treats the energy spike as a supply shock to look through, the number that matters is 2.5% — half a point from the 2% goal, with a labour market that is now shedding jobs. That is a case for holding, then easing, and for a softer dollar.
If instead the committee fears the energy shock feeding into wages and expectations, 3.4% is the number that matters, and a further hike stays live. Markets have been pricing that risk at roughly a one-in-three chance for the September meeting — a materially higher probability of a hike than most 2026 dollar commentary assumes.
There is a third layer. Kevin Warsh succeeded Jerome Powell as Federal Reserve Chair in May 2026. A new chair with a limited track record in the role widens the range of plausible outcomes at every meeting, which is itself a reason to expect a choppier dollar rather than a clean trend. Our next Federal Reserve interest rate decision page carries the current policy rate, the vote split and the confirmed meeting date.
Will the US dollar get stronger or weaker in 2026?
The balance of risk over the rest of 2026 points to a modestly weaker dollar, but the path is unlikely to be smooth. The dollar’s support this year has come from high US rates and a Fed with no room to cut. Cooling core inflation and a contracting labour market are steadily removing both.
Working against that: energy is a live wire. Any renewed supply disruption pushes headline inflation back up, kills the easing case, and the dollar firms again quickly. That is the main reason we are not forecasting a one-way decline.
For sterling specifically, there is a structural point worth understanding. The Bank of England has held Bank Rate at 3.75% while the Fed’s target range sits at 3.50%–3.75%. The interest rate advantage the dollar carried over the pound has effectively closed. That is why GBP/USD is trading in the mid-1.30s rather than the mid-1.20s, and it is a more durable support for cable than any single data print.
US dollar forecast for the next 6 months: month-by-month ranges
These are the illustrative ranges Cambridge Currencies is working to for the remainder of 2026. The upper end of each DXY range reflects the hike-risk case; the lower end reflects the Fed looking through energy and easing. GBP/USD and EUR/USD broadly move the opposite way to the DXY.
| Month (2026) | DXY range | GBP/USD range | EUR/USD range |
|---|---|---|---|
| August | 98–101 | 1.33–1.37 | 1.14–1.17 |
| September | 97–101 | 1.32–1.37 | 1.14–1.18 |
| October | 96–100 | 1.33–1.38 | 1.14–1.18 |
| November | 95–100 | 1.33–1.39 | 1.15–1.19 |
| December | 94–99 | 1.34–1.40 | 1.15–1.19 |
Illustrative Cambridge Currencies ranges based on market pricing and the current rate path. They are not guarantees, and rates may move either way.
Each of these has a page of its own with the detail behind it. Our US Dollar Index forecast extends the DXY view further into 2027, where rate support fades and the range drifts lower. The pound to dollar forecast covers cable in full, and the euro to dollar forecast covers the pair that dominates the index. For live rates week by week, see the currency forecast hub.
The same mechanism drives the dollar against currencies outside the G10. When US rates stay high the dollar tends to hold its value against the rupee, peso and lira; it eases when the Fed turns toward cuts. Readers focused on that corridor will find more in our USD to INR forecast.
How does today’s rate compare with sterling’s recent history?
Context matters more than the daily number. At roughly 1.35, sterling sits around 30% above its all-time low of about 1.035, set on 26 September 2022 during the mini-budget crisis. Anyone who bought dollars at that point paid nearly a third more in sterling than they would today.
Measured against the past twelve months, however, cable is close to flat. The mid-1.30s is not a spike — it is where this pair has spent most of the past year, held there by the closed rate differential described above.
For a UK buyer of dollars, that is the practical read: current levels are favourable against the last five years, unremarkable against the last twelve months, and the forecast range to December sits above rather than below where we are now. Whether that makes it the right moment for you depends on your deadline, not on the chart. Our guide on whether to buy US dollars now works through that decision.
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:
| Illustrative GBP/USD rate | Sterling cost of $200,000 | Difference vs 1.35 |
|---|---|---|
| 1.30 | £153,846 | £5,698 more |
| 1.35 | £148,148 | — |
| 1.40 | £142,857 | £5,291 less |
A five-cent move either way is worth over £5,000 on a $200k purchase. Scale that up: a 2% move on a $500,000 purchase is roughly £7,400.
Set against that, the spread you pay matters too, and it is the part you can control. High street banks typically build in a 3–4% margin on the interbank rate. A specialist broker generally works on 0.2–1%. On the same $200k transfer, that difference is worth several thousand pounds before the market has moved at all.
This applies whether you are moving to the USA from the UK, paying US suppliers in dollars, or simply sending money to the USA.
How to manage dollar risk between now and year-end
With the Fed’s next move genuinely two-sided, 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 in today’s rate for a future date, typically up to twelve months out, usually against a deposit. It removes the outcome from the equation entirely — 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. Markets price expected decisions in advance, so waiting for a scheduled Fed meeting often means the move has already happened by the time you act. 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.
Frequently asked questions
What is the US dollar forecast for the next 6 months?
Cambridge Currencies expects the dollar index to trade between 94 and 101 over the next six months, with a softening bias into year-end. On that basis GBP/USD could hold a 1.32–1.40 range and EUR/USD 1.14–1.19. The main risk to a softer dollar is a renewed energy-price spike that pushes US headline inflation higher and keeps a Federal Reserve rate hike in play.
Will the US dollar get stronger in 2026?
The dollar was stronger than consensus expected through the first half of 2026, but it has eased below 100 on the dollar index since US payrolls fell in July. It could firm again if inflation re-accelerates and the Federal Reserve hikes. The base case for the rest of the year is a modestly weaker dollar rather than a stronger one.
What is the USD prediction for 2026?
Our USD prediction for the rest of 2026 is a dollar index between 94 and 101, drifting toward the lower half of that band by December as the Federal Reserve regains room to ease. That points to GBP/USD around 1.32–1.40 and EUR/USD around 1.14–1.19. Ranges are illustrative and rates may move either way.
When will the US dollar get stronger or weaker?
The turning point is the Federal Reserve’s response to two conflicting signals: a labour market that is now losing jobs, and headline inflation still above target because of energy. A softer dollar becomes more likely once the committee signals it is looking through the energy shock. A hike would push the dollar the other way. The scheduled meeting dates are on our Federal Reserve decision page.
Why is US core inflation lower than headline inflation?
Core inflation excludes food and energy, the two most volatile components. In the year to July 2026, US headline CPI was 3.4% while core was 2.5%. The 0.9 percentage point gap is largely energy prices driven by supply disruption. Central banks watch core closely because interest rates influence domestic demand but cannot change the global price of oil.
What is the DXY dollar index outlook for 2026?
The US Dollar Index is forecast between 94 and 101 across the rest of 2026, with a gentle downward drift into year-end as the base case. The index measures the dollar against six currencies, with the euro carrying by far the heaviest weight, so its direction is mostly a story about US rates relative to the eurozone.
Is the US dollar going to collapse in 2026?
A collapse is not the base case. The realistic debate is about a gradual decline as rate support fades, not a sudden crash. 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 fall.
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.
Planning a dollar transfer before year-end? Talk it through with a Cambridge Currencies specialist. Whether you are settling a US property purchase, paying a dollar invoice or bringing 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.
Related guides: US dollar forecast 2027 · GBP/USD forecast · DXY forecast · Next Federal Reserve rate decision
