USD: Expect the strong trend to fade – Goldman Sachs

Goldman Sachs FX team has recently downgraded their forecasts for further dollar strength as they think the sustained appreciation in the broad US dollar appears to be moving into its latter stages.

Key Quotes

“They are not quite ready to call the dollar trend over, as several factors supporting appreciation over the last three years remain in place, including: (1) a US economy at full employment, (2) expected US fiscal stimulus, and (3) conservative market pricing for the Fed. However, a number of fundamentals have changed: (1) the dollar is now moderately overvalued according to GSDEER and other standard metrics, (2) growth outside the US is picking up, and (3) the scope for monetary policy divergence beyond this year is much smaller than in the past.”

“They are therefore revising down our 12-month forecasts for appreciation in the (nominal) trade-weighted dollar to +3.25% from +6.75% previously. Among G10 currencies we expect the dollar to outperform GBP, JPY, EUR, CHF, and SEK but underperform NZD, CAD, NOK, and AUD.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.