For most of this quarter the dollar has done the opposite of what the consensus expected — and after the June Federal Reserve meeting it pushed higher still. Here is my updated take on where the dollar and GBP/USD are heading through the rest of 2026. You can always request a quote and talk it through with a specialist.
What’s happening with the US dollar right now?
As I write on 19 June, the DXY trades around 100.7, its highest since May 2025 and up roughly 1.4% over four weeks. GBP/USD sits near 1.34, and EUR/USD has eased to around 1.143 — softer than a month ago, even though the European Central Bank raised rates on 11 June. The dollar’s strength is the common thread, driven by two forces.
The first is inflation. The energy shock from the Iran conflict pushed US headline CPI to 4.2% in May 2026 (Bureau of Labor Statistics), the highest since April 2023, with energy prices up more than 23% year-on-year. Core CPI, at 2.9%, is firmer but well below the headline — so the spike is still largely energy-led. Either way, inflation that high has removed the Fed’s room to cut, and markets now fully price a possible rate hike by October. Higher-for-longer US rates support the dollar.
The second is the Iran ceasefire and energy prices. A US–Iran ceasefire framework has held and oil has fallen sharply from its peak — Brent dropped from above $110 a barrel in April to the low-$90s by late May. That has eased the worst of the energy fear, but the framework remains fragile, and the inflation it has already created is still feeding through. The result is a dollar that stays supported on rate differentials even as the safe-haven premium fades.
US dollar outlook 2026: the Fed under Kevin Warsh
Kevin Warsh took over as Fed Chair when Jerome Powell’s term ended in May, and 17 June was his first policy meeting. The Fed held the federal funds target range at 3.50%–3.75% in a unanimous 12–0 vote — but the projections underneath told a more hawkish story. The updated dot plot now shows a median year-end 2026 rate of 3.8%, up sharply from 3.4% in March — a flip from an implied cut to an implied hike. Nine of 18 officials pencilled in at least one rise this year, only one expects a cut, and 17 of 18 judged inflation risks tilted to the upside.
Here is the tension, and in my view it is the key to the whole picture. President Trump has been vocal about wanting lower rates, and Warsh was seen as more open to cutting — yet he has inherited 4.2% inflation, and he cannot simply cut into that. That conflict is exactly why the dollar has firmed. The next Fed decision is 29 July 2026 — for anyone with a USD payment around that date, fixing the rate beforehand removes the single most consequential unknown of the next several weeks. I cover it in our next Federal Reserve interest rate decision update.
Will the US dollar get stronger or weaker in 2026?
My honest answer is that it is now two-sided, but the near-term balance has tilted toward dollar strength. My one-line USD prediction for 2026: the dollar stays firm in the near term, and softens later only if the Iran ceasefire holds firmly and US inflation cools enough to let the Fed cut.
For the dollar to weaken meaningfully into the back half of the year, I would want to see two things: the ceasefire fully secured, removing any residual risk premium, and US inflation resuming its decline. If both happen, a softer dollar is the path of least resistance. If neither does, the dollar stays supported — which is why I forecast wide ranges this year rather than a single number.
The major-bank consensus earlier in 2026 leaned toward dollar weakness, with Goldman Sachs, JPMorgan and MUFG pointing to a DXY in the low-90s. But every one of those calls rests on the Fed cutting rates — and with inflation back above 4%, those cuts have been pushed back. That is the single biggest reason the dollar has firmed against the consensus.
My GBP/USD forecast for the next six months
GBP/USD is largely a dollar story — sterling hasn’t weakened so much as the dollar has firmed. The Bank of England held Bank Rate at 3.75% on 18 June in a 7–2 vote, with two members preferring a hike, and its next decision is 30 July. UK inflation, at 2.8%, is lower than in the US, and the relative path of the two central banks is what drives this pair. With both on hold and the Fed leaning hawkish, that argues for cable holding in a range rather than breaking higher. Follow the UK side in our next Bank of England interest rate decision update and the wider GBP forecast for 2026.
Here are the ranges I am working to. The upper end of each DXY range reflects the dollar staying firm; the lower end reflects the softer-dollar case.
| Pair / Index | Near-term (July) | Q3 (Sept) | Q4 (Dec) |
|---|---|---|---|
| DXY | 98–102 | 96–101 | 94–100 |
| GBP/USD | 1.32–1.36 | 1.33–1.39 | 1.34–1.41 |
| EUR/USD | 1.13–1.17 | 1.14–1.19 | 1.15–1.21 |
These are Cambridge Currencies’ ranges based on current market pricing; they are not guarantees, and rates may move either way.
What about EUR/USD?
The ECB raised its deposit rate to 2.25% on 11 June 2026 — its first hike since 2023 — as eurozone inflation hit 3.2%. That would normally lift the euro, but EUR/USD has still eased to around 1.143, because the Fed’s hawkish signal and the dollar’s rate advantage outweighed it. I expect EUR/USD to hold roughly 1.13–1.21 across the rest of the year.
Is it a good time to buy or sell US dollars?
GBP/USD reached around 1.38 in late January and trades near 1.34 now — so dollars are more expensive to buy than in the winter. If you are buying dollars for an invoice or a US property purchase, the cheaper window has narrowed. If you are selling dollars, the firmer dollar has improved your pound proceeds for now, but that reverses if sterling strengthens later. To put numbers on it, $200,000 at 1.34 yields about £149,254; the same sum at 1.40 yields about £142,857 — a difference of roughly £6,400 on one transfer.
This is where the tools matter. A forward contract fixes today’s rate for up to twelve months — useful for certainty around the 29 July Fed meeting. A limit order targets a better rate automatically, and splitting a large amount into tranches averages your timing. See whether to lock in a rate now or wait and the best way to transfer 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 in 2026?
The dollar has been stronger than the consensus expected, with the DXY breaking above 100 on US inflation of 4.2% and a hawkish Fed. The medium-term consensus still leans toward a softer dollar, but only once the Fed has room to cut.
What is the USD prediction for 2026?
My USD prediction is that the DXY trades broadly between 94 and 102 across the rest of the year — firm near term, then softer later only if the Iran ceasefire holds firmly and US inflation cools. On that basis I expect GBP/USD at 1.32–1.41 and EUR/USD at 1.13–1.21.
When will the US dollar get stronger?
The dollar has already strengthened through mid-2026, with the DXY breaking above 100 in June on high US inflation and a hawkish Fed. Whether it strengthens further depends on the next inflation prints and the 29 July Fed meeting; a sustained move higher would likely need inflation to stay elevated or the Iran ceasefire to falter. My base case is that it holds firm near term and softens only later in the year if the Fed gains room to cut.
What is the DXY dollar index outlook for 2026?
The US Dollar Index is forecast to trade broadly between 94 and 102 across the rest of 2026. It rose above 100 in June — its highest since May 2025 — after the hawkish Fed meeting. Bearish-dollar bank forecasts point to the low-90s, but those calls depend on Fed rate cuts that have been pushed back by stronger inflation.
What did the Federal Reserve do in June 2026?
The Fed held the federal funds target range at 3.50%–3.75% on 17 June 2026, in Kevin Warsh’s first meeting as Chair. Its projections turned hawkish, with the median policymaker now expecting rates to end 2026 higher than today. The next decision is 29 July 2026.
Should I fix a dollar rate before the next Fed meeting?
Markets usually price expected decisions in advance, so waiting for 29 July can mean the move has already happened. A forward contract lets you fix today’s rate and removes the need to time the meeting.
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 · GBP forecast 2026 · Next Federal Reserve rate decision · What is a forward contract?
