Goldman USD Forecast Under Review, Still Expect TW Depreciation Medium Term

Goldman Sachs note that "despite the hawkish June FOMC meeting, we do not see a case for sustained Dollar appreciation. Most importantly, our own Fed expectations are more dovish than current market pricing: our economists forecast one rate hike by end-2023 compared to the roughly three currently priced in. They also note that the liftoff timeline could be pushed back again if inflation falls back more significantly or if fading fiscal support weighs sufficiently on growth. Moreover, activity is rebounding from depressed levels in other economies, and many other central banks will also need to move away from easy monetary policy over time (including in EM, as discussed below). Finally, the Dollar remains overvalued and highly positioned following U.S. asset market outperformance during the last business cycle, pointing to more structural downside than upside. In light of the FOMC meeting we are putting our Dollar cross forecasts under review, but continue to anticipate trade-weighted depreciation over the medium-term."