US Dollar Forecast: DXY Slips as Weak Jobs and Services Data Hit Fed Outlook

Dollar Index Pressured as Weak Payrolls and Services Data Weigh on Fed Outlook

The U.S. Dollar Index (DXY) slipped Wednesday, driven by disappointing labor and services data, renewed political pressure on the Federal Reserve, and escalating trade tensions. Though the index remains within Tuesday’s range, the technical outlook has turned fragile with a clear bearish bias.

ADP Miss Sparks Fed Rate Cut Talk — How Low Can Yields Go?

May’s ADP private payrolls data shocked markets with just 37,000 jobs added — far below the 110,000 forecast and the weakest showing in over two years. April’s figure was also revised down to 60,000. This glaring shortfall, coupled with May’s ISM services index dipping below 50 (at 49.9), marked the first contraction in that sector in nearly a year. The reaction in bond markets was swift: 2-year yields dropped to 3.889% and 10-year yields fell more than 8 basis points to 4.377%, reflecting investor bets on potential Fed easing.

Trump Doubles Down on Rate Cut Demands, Renews China Criticism

President Donald Trump seized on the weak jobs data to amplify pressure on Fed Chair Jerome Powell, renewing calls for immediate rate cuts. Trump’s tone intensified as trade friction returned to center stage. On Wednesday, the U.S. doubled tariffs on imported steel and aluminum to 50%, the same day it demanded new trade offers from key partners. He also took aim at China’s President Xi, calling him “tough” and “hard to make a deal with,” fueling concerns over progress in U.S.-China negotiations.

Dollar Slides Across the Board — What Are the Key FX Moves?

The DXY was last down 0.3% at 98.847, testing late-April support near 97.923. The dollar fell 0.6% against the yen to 143.165 and dropped 0.5% against the Swiss franc.

The euro rose to $1.1424 ahead of the ECB’s Thursday rate decision, while sterling gained 0.3% to $1.35585. The Canadian dollar also firmed after the Bank of Canada held rates steady at 2.75%, citing uncertainty around U.S. trade policy.

Market Forecast: Dollar Index Still Bearish Below 99.392

The DXY remains under bearish pressure. A move above 99.392 could trigger short-covering toward resistance at 99.949, but traders are watching closely for a downside break of 98.723, which would open the door to 97.921–97.685. With bearish fundamentals and weak data momentum, a Fed pivot or a material positive surprise would be needed to alter sentiment. For now, risk remains skewed lower ahead of Friday’s nonfarm payrolls report.

More Information in our Economic Calendar.