“Global Investment Bank Goldman Sachs predicts a bigger-than-expected rise in the US Dollar”

Investing.com – Global investment bank Goldman Sachs (NYSE:) said the US dollar has more room to run than the market currently appreciates.

Goldman analysts Michael Cahill and Lexi Kanter wrote in a note on Tuesday that credit conditions in the United States have not tightened as much as initially feared, while activity in Europe and China disappointed strong expectations earlier in the year.

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They continued, “There is likely to be more room for the dollar to gain more strength in the near term than the market priced in, and we believe that the overall dollar depreciation for this year is more constrained than thought.”

It has gained more than 1% so far in May as markets adjusted expectations for the timing of interest rate cuts from the Federal Reserve, coinciding with debt ceiling talks that also boosted the currency’s haven appeal. This came after two months of depreciation of the dollar.

The bank’s analysts said, “The dollar is likely to slow only slightly from the peak, because the possibility of the economy entering a recession is still limited, so monetary policy makers will have to do more.”

“Dollar depreciation is usually associated with strong growth in the rest of the world, not weak growth in the US. So we are still waiting for a competitor to the dollar, which hasn’t stepped in yet.”

They said that there are not enough factors to ensure the continued appreciation of the euro, besides that the policy paths of the Federal Reserve and the European Central Bank are not divergent, while maintaining their forecast for the single currency at 1.10 per dollar at the end of 2023.

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