① Goldman Sachs raised its dollar forecast, expecting the dollar to rise about 5% in the next year due to a strong USA economy and the likely increase in tariffs, while the pace of the Federal Reserve's easing of MMF policy may slow down; ② Goldman Sachs predicts that the EUR/USD Exchange Rates will fall below parity within six months, to 1 USD = 0.97 EUR; the British Pound to USD Exchange Rates expectation has been adjusted from 1.32 to 1.22.
On January 13, Financial Associated Press reported (Editor Liu Rui) that after the exceptionally strong non-farm payroll report was released last Friday, Goldman Sachs Group raised its dollar forecast, believing that under the backdrop of a strong USA economy and expected tariffs pushing up inflation, the Federal Reserve's pace of easing MMF policy may slow.
Goldman Sachs strategists, including Kamakshya Trivedi, wrote in a report: "We expect that with the implementation of new tariffs and the continued strong performance of the USA economy, the dollar will rise about 5% in the next year." Even after this adjustment, "we still believe there is a risk of further strengthening of the dollar."
Super strong non-farm payrolls impact Federal Reserve interest rate cut expectations.
This is the second time Goldman Sachs has raised its dollar forecast in about two months. Due to the continuous strong growth of the USA economy and the potential tariffs planned by President-elect Trump that may exacerbate inflation, market confidence in the Federal Reserve continuing to cut interest rates has recently weakened.
The non-farm payroll report released last Friday became another heavy blow to market expectations: not only did the number of new jobs reach a surprising 0.256 million, but the previously slightly rising unemployment rate also turned around and fell to 4.1%.
Due to the exceptionally strong non-farm payroll report, the team led by Goldman Sachs Chief Economist Jan Hatzius has changed the Federal Reserve's interest rate cut path from March, June, and September this year to one cut in June and another in December.
Bank of America economist Aditya Bhave even announced that in the face of a very strong December employment report, the (Federal Reserve's) rate cut cycle has ended. If the annual growth rate of core PCE exceeds 3%, and inflation expectations rise, the next discussion will focus on when the Federal Reserve will raise interest rates.
EUR/USD is expected to fall below parity again.
Against the backdrop of continued concerns on Wall Street over the Federal Reserve slowing its rate cuts, Goldman Sachs expects the Exchange Rates of the dollar against a basket of currencies such as the euro and the Australian Dollar to continue to rise, and market optimism for the dollar is likely to further strengthen.
Goldman Sachs currently expects the Exchange Rates of the euro against the dollar to fall below parity within the next six months, to 1 euro equals 0.97 dollars, in contrast to its previous prediction of 1 euro equals 1.05 dollars. The last time the euro fell below parity was in 2022, when the outbreak of the Russia-Ukraine conflict triggered an Energy crisis in Europe, raising high concerns over the economic outlook in Europe.
At the same time, Goldman Sachs has downgraded its forecast for the Exchange Rates of the British Pound against the dollar from 1.32 to 1.22 for the next six months. On Monday, the British Pound fell 0.7% to 1.2126 dollars, the lowest level since November 2023.
Goldman Sachs also predicts that the Exchange Rates of the Australian Dollar against the dollar will be 1 Australian Dollar equals 0.62 dollars in the next three months, compared to the previous forecast of 0.66 dollars. The Australian Dollar fell 0.1% on Monday, trading around 1 Australian Dollar equals 0.61 dollars.
Goldman Sachs has recently raised its dollar forecast, marking a shift in its optimistic expectations regarding Federal Reserve rate cuts.
In September of last year, Goldman Sachs had briefly lowered its expectations for the dollar, as it anticipated that the dollar would retreat from overvaluation with the Federal Reserve continuing to ease monetary policy. However, since the election on November 5 of last year, due to heightened market concerns that Trump’s tariff plan could boost inflation, the dollar has continued to rise, resulting in Goldman Sachs' expectations being disappointed.