Goldman Sachs: Key Themes in updated FX forecasts | Forexlive

Key Themes:

1. Revisions in Rate-Sensitive Currencies:

   • Goldman Sachs has made significant revisions in forecasts for currencies sensitive to interest rate changes, notably JPY, SEK, and IDR.
   • These adjustments primarily reflect the observed shifts in these currencies over recent months, moving away from a “higher for longer” rates scenario.

2. Potential in Pro-Cyclical Currencies:

   • The firm identifies substantial potential in pro-cyclical currencies, such as KRW, ZAR, AUD, NZD, and GBP.
   • These currencies are expected to benefit from the Federal Reserve’s easing of financial conditions, contributing to the likelihood of a global economic soft landing.

3. Moderate Returns in Key Challenger Currencies:

   • Despite the forecasted USD weakness, Goldman Sachs anticipates relatively moderate returns from key challenger currencies like EUR, CNY, and JPY.
   • This outlook is based on various domestic challenges and idiosyncrasies these currencies face.

Conclusion:

Goldman Sachs’ updated FX forecasts envision more pronounced USD weakness, with the most substantial revisions in rate-sensitive currencies. The bank sees notable opportunities in pro-cyclical currencies benefiting from a softer monetary stance by the Fed. However, returns from key challenger currencies are expected to be more contained, reflecting their unique domestic challenges. These themes collectively suggest a shift in the FX market dynamics, with implications for investors and traders focused on currency movements.

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