Goldman Sachs’s team of currency analysts stand by their call for the dollar to strengthen up bluntly against major rival currencies following last week’s FED’s meeting.
While skimming a note released by Robin Brooks with a title of Going up is hard to do, he explains why a renewed Dollar rally positions itself on an extreme side – more than a year after the U.S. currency hit a 12-year high.
It’s worth mentioning here that before the Federal Reserve’s meeting, Goldman teach had demanded for another blow power to Dollar meanwhile the FED came out *dovish, the dollar tanked.
(Even if the FED continues to send dovish signals—something it might be doing solely to keep the dollar from strengthening, the team speculated—strong economic data may ultimately force its hand)
The analysts looked forward to dollar for its rise against the Euro after the December and March meetings of the European Central Bank. In both cases, the dollar had disappointed, however.
“If we are right about the data, the Federal Reserve could quickly reverse course, in line with our U.S. team’s call. We see no conspiracy to stabilize exchange rates. Just an unfortunate string of misfires from central banks (most notably the ECB), which will ultimately reinforce the divergence theme.” – Goldman team
INSIGHT: Central banks around the world have redoubled their easing efforts since the start of the year. In recent weeks, the European Central Bank, Bank of Japan, People’s Bank of China and Norway’s Norges Bank have all further loosened monetary policy.
