Source: Wall Street
Author: Zhou Xiaowen
Analysts believe that once a clear rate hike may be close to a pause, the dollar may also peak ahead of time.
Goldman Sachs Group said the dollar could peak sooner than the market expected.
In a new report by Goldman Sachs Group this week, analysts studied the dollar's previous all-time highs and pointed out that the dollar is likely to peak ahead of Fed easing:
It may be reasonable to consider what happened in the mid-1970s and mid-1980s, when inflation was equally high.
These similarities suggest that the dollar may peak without seeing that the Fed has loosened sharply or inflation is at the bottom.And once it is clear that the US interest rate hike may be close to a pause, or if the Fed's voice on the policy shift is credible，Even if US economic activity is still slowing, it is likely to peak ahead of time.
So far this year, the Fed has raised its policy rate by 300 basis points in an effort to curb inflation, and the market expects it to continue to raise interest rates until next year. Affected by the rise in interest rates, the US dollar has risen sharply this year, while currencies such as the euro and the yen have been depressed.
Last week, Mary Daly, president of the Federal Reserve Bank of San Francisco, said it was time to start talking about slowing the pace of interest rate hikes. Earlier, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, warned that the Fed would continue to raise interest rates "for some time".
Earlier, Goldman Sachs Group pointed out that the all-time high of the dollar coincided with the bottoming of US and global economic growth and the easing policy of the Federal Reserve. As a result, Goldman Sachs Group said at the time that this showed that the current peak of the dollar was far from there because the bank did not expect the Fed to start cutting interest rates until 2024.
But in this week's report, Goldman Sachs Group changed this view:
Sometime in the first half of 2023, we may see these factors coming together: we may get through the worst of the winter recession in Europe, and the new leadership of the Bank of Japan may gradually begin to tighten policy. Us interest rates have finally peaked and US inflation and labour markets have moderated. But we haven't done that yet.
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