Investing.com – The U.S. dollar has been one of the year’s success stories so far, with Goldman Sachs updating its forecasts, leaning toward the greenback being “stronger for a long time.”
The influential investment bank wrote in a note dated April 19 that as the second quarter approaches, the ongoing update of already robust U.S. economic growth forecasts gives the FOMC the luxury of a later, more gradual policy adjustment.
The bank’s economists still expect policymakers in most other advanced market economies to start the cycle earlier with consistent rate cuts.
“This opens up some policy divergence in our base-case forecast, which tilts towards a ‘strong and durable’ US dollar,” the bank’s analysts said.
“Importantly for the foreign exchange market, the rate cut we expect is unlikely to be materially negative for the dollar as it is unlikely to undermine the dollar’s position as a safe-haven currency with a relatively high carry rate and strong capital return prospects.”
The bank also expects the upcoming US elections will also begin to have a more immediate impact on currency markets, at least by limiting portfolio flows to other jurisdictions, as both candidates have proposed greater fiscal support and trade restrictions.
As a result, the bank is making a number of adjustments to its forecasts, including lowering 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, respectively). .
It also raised its forecasts to 155 yen in three months, 155 yen in six months and 150 yen in a year (from 155, 150 and 145 yen, respectively) and cut forecasts to $0.63 in three months, $0.65 in six months and $0.65 for six months. $0.67 per year (from $0.68, $0.70 and $0.72).
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At 09:10 ET (1310 GMT), EUR/USD was trading at $1.0638, USD/JPY at 154.73 yen and AUD/USD at $0.6434.