Investing.com – The US dollar has been trading quietly against the majors lately, and these narrow ranges are likely to persist for a while, according to Goldman Sachs, with divergence having to wait.
AT 05:20 ET (09:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading unchanged at 104.330, stabilizing after losing around 1% last week in the wake of soft U.S. inflation data.
“We believe there is limited room for the market to push dollar shorts on inflation news,” Goldman Sachs analysts said in a May 17 note.
“Although the prints largely met expectations, they did not meet the objectives. As a result, the news does not change the policy outlook much beyond reinforcing recent rhetoric.”
The market’s subsequent reaction was reminiscent of the post-March FOMC-FX reaction, when the reaction to “softening points” stalled not because of new data, but instead because currency is still a relative game and the fundamentals values of the dollar have not changed much. the investment bank added.
And this time, we think the rally in front interest rates appears to be more consistent with cyclical concerns than dovish expectations.
“That is important for the foreign exchange market because there is a narrow path along which the dollar can depreciate on a broad basis when growth weakens,” the bank added. “This is especially true in the current environment, where faster Fed cuts would likely come with easier policies abroad as well.”
