US Dollar Edges Higher Ahead of Inflation Report. Forecast as of 10.09.2025
Donald Trump’s efforts to undermine the Federal Reserve’s independence and his trade policies have sparked a surge in investor demand for the US dollar. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- Lisa Cook will attend the Fed meeting.
- The Supreme Court will consider Trump’s appeal in November.
- Speculators are hedging risks due to inflation.
- Long trades can be considered if the EURUSD pair settles above 1.171.
Weekly US Dollar Fundamental Forecast
If Donald Trump seeks a weaker dollar, any missteps by the president are perceived as a reason to buy the greenback. A federal judge has ruled that Lisa Cook will continue to serve as the Fed official for the time being. The US president’s decision to dismiss her cannot be based on unproven conduct that occurred before she took office. In response, the derivatives market adjusted its projections, lowering the likelihood of three rate cuts in 2025 from 75% to 65%. Against this backdrop, EURUSD bears managed to recover their losses.
Donald Trump’s series of setbacks extends beyond his ongoing dispute with the Federal Reserve. While the Supreme Court has permitted the US administration to expedite its appeal, the outcome is a foregone conclusion. Tariffs will need to be rolled back and money returned, which, according to Treasury Secretary Scott Bessent, would amount to approximately $750 billion to $1 trillion. A court ruling against the US president will have severe ramifications. However, there is a view in the market that removing tariff uncertainty will boost the US economy.
If current trends persist, the US economy risks losing momentum and falling behind its competitors. Fitch has raised its global GDP growth estimates for 2025 from 2.2% to 2.4%, for the eurozone from 0.8% to 1.1%, and for China from 4.2% to 4.7%. The agency attributes this to countries’ resilience to tariffs and reduced uncertainty following the conclusion of trade agreements with the US.
Speculative Positions on US Dollar
Source: Bloomberg.
The divergence in monetary policy and economic growth, which will likely become more apparent in 2026, gives speculators reason to bet on a weakening US dollar. According to Invesco, the USD index is poised to continue its downward trajectory. Historically, a narrowing of the spread has preceded a decline in the greenback, despite higher US bond yields.
In this regard, the recent revision of BLS data on US employment for the 12 months leading up to March, which showed a figure of -911,000, should have fueled the EURUSD pair’s rally. The average monthly figure fell to 76,000 new jobs, nearly half of the previous 147,000.
Revised BLS Employment Data
Source: Bloomberg.
If the labor market proves weaker than anticipated, the Fed has ample justification for lowering rates. Such a scenario would lead to a weaker US dollar. The EURUSD pair’s decline was likely because speculators closed their short positions on the greenback ahead of important inflation reports. The market is concerned about the excessively high estimate of the scale of monetary expansion in 2026.
Weekly EURUSD Trading Plan
However, this will likely not alter the overall outlook. Despite the potential for rising prices, the Fed is committed to resuming its cycle of monetary policy easing in September. Therefore, traders have a valuable opportunity to capitalize on market pullbacks. If the EURUSD pair remains above 1.171, it will generate a buy signal.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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