Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTArslan Ali ButtFri, September 18, 2026 at 8:30 AM GMT+2 4 min readDollar Index Outlook: Fed Tightening Supports Dollar as BoE Turns Hawkish and ECB Urges PatienceThis Friday's Dollar Index looks strong due to several central bank policies. First, the Fed raised interest rates this week and shows more hikes are likely. Meanwhile, the Bank of England (BoE) is becoming more hawkish, and the European Central Bank (ECB) is encouraging more patience before any policy changes.The U.S. dollar and forex markets have been largely Federal Reserve focused this week. After raising its base rates by 25 basis points to the 3.75% – 4.00% range, the greenback consolidated as oil and equity markets retraced. Nonetheless, the CME Group's Fed Funds rate tool shows a 95% probability of a fourth rate hike next month.The U.S. Dollar Index (DXY) is also contending with declining energy prices. While the recent BOJ 50 basis point rate hike was unsuccessful in weakening the dollar, the split vote suggests further Japanese monetary policy tightening will be gradual, easing inflation concerns. Meanwhile, the ECB is signaling patience.ECU policy is becoming harder to read. The ECB lifted its deposit rate to 2.50% last week. Vujcic, however, noted that further rate hikes are not certain. Higher inflation expectations do not necessarily mean further hikes are warranted. According to him, policymakers will look at other data, including growth and economic activity. The markets, however, expect further rate hikes.The Bank of England also met this week. Three members of the MPC also voted to raise rates this week and bring them to 4.00%. The Bank also withdrew its guidance which included its expectation of inflation of 4% in early 2023. Governor Andrew Bailey did not rule out further rate hikes if energy costs remained elevated.The Bank of England also extended the tenor of its gilt purchases to 6 months from the time of writing. This was expected to ease gilt market illiquidity.Fundamental bias: EUR expected to appreciate vs. USD, GBP expected to appreciate vs. USD.U.S. Dollar Index Technical Analysis: DXY Holds 100.19 Support as 100.37 Breakout Stays in FocusDollar Index Price Chart – Source: TradingviewThe U.S. Dollar Index is currently trading at 100.29 on the 2-hour time frame. Price has formed a consolidation pattern just below the 100.37 resistance level. A breakout above the 100.37 level may open the way to 100.53 followed by 100.68.For now, I will consider 100.19 as a floor level for the consolidation. In case of a further extension of the consolidation, the 100.08 and 99.99 levels may gain support levels.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info