Investing.com – The US dollar has been one of the success stories of the year so far, and Goldman Sachs has updated its forecasts and is leaning towards a ‘stronger dollar for longer’.
The influential investment bank wrote in an April 19 note that as we enter the second quarter, continued upgrades to already robust U.S. growth forecasts give the FOMC the luxury of a later and more gradual policy adjustment.
The bank’s economists still expect policymakers in most other developed market economies to start the cycle earlier with successive rate cuts.
“This leads to some policy differences in our baseline outlook, which is tilted towards a ‘stronger and longer’ US dollar,” the bank’s analysts said.
“Importantly for the currency, the rate cuts we expect are unlikely to be significantly negative for the dollar as they are unlikely to erode the dollar’s position as a relatively high-carry, safe-haven currency with strong capital return prospects.”
The bank also expects the upcoming US election to have a more direct impact on currency markets, at least by limiting portfolio flows to other jurisdictions, while both candidates have proposed more budget support and trade restrictions.
As a result, the bank is making a series of adjustments to its forecasts, including lowering its forecasts to $1.05 in three months, $1.05 in six months and $1.08 in a year (from $1.08, $1, 10 and $1.12).
It also raised its forecasts to ¥155 in three months, ¥155 in six months and ¥150 in a year (from ¥155, ¥150 and ¥145 respectively), and lowered the forecasts to $0.63 in three months, $ 0.65 in six months and $0.65 in six months. $0.67 per year (from $0.68, $0.70 and $0.72).
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At 09:10 ET (13:10 GMT), EUR/USD was trading at $1.0638, USD/JPY at ¥154.73 and AUD/USD at $0.6434.
