The U.S. dollar has been trading steadily against major currencies, and this trend is likely to continue for the foreseeable future, according to Goldman Sachs. Divergence in the dollar’s value will have to wait. At 05:20 ET (09:20 GMT), the Dollar Index, which measures the dollar against a basket of six other currencies, remained unchanged at 104.330. This comes after the index lost about 1% last week following soft U.S. inflation data. “We believe there is limited scope for the market to push Dollar shorts based on the inflation news,” analysts at Goldman Sachs stated in a note dated May 17. “While the inflation figures were mostly in line with expectations, they did not meet the target. Consequently, this does not significantly alter the policy outlook beyond reinforcing recent rhetoric.”
The market’s response has been similar to the reaction after the March Federal Open Market Committee (FOMC) meeting, where the response to ‘dovish dots’ stalled. This was not due to new data, but because foreign exchange (FX) remains a relative game, and the fundamentals of the dollar have not changed significantly, the investment bank noted. This time, the rally in short-term rates appears more aligned with cyclical concerns rather than dovish expectations. “This is significant for FX because there is limited room for the Dollar to depreciate broadly when growth is slowing,” the bank added. “This is particularly true in the current environment, where quicker Federal Reserve rate cuts would likely be matched by easier policy abroad as well.”
#FinanceNews #USDollarNews #CurrencyTrading #GoldmanSachs #DollarIndexNews
