Key Moments
- Goldman Sachs expects a gradual flow of delayed U.S. economic data to show a softer economy and labor market, paving the way for more policy easing and a weaker dollar into year-end.
- The bank highlights subdued FX volatility so far, with early indications suggesting softer momentum despite lagged data releases.
- Goldman Sachs and Credit Agricole both point to a combination of global risk sentiment, policy expectations, and country-specific drivers as supportive of broad-based dollar weakness through year-end.
Goldman Sachs Sees Softer Data Undermining Dollar
Goldman Sachs argues that the slow and staggered release of previously delayed U.S. economic indicators should “reveal a softer run rate for the economy, particularly the labor market, that will clear the way for more policy easing and a weaker dollar from here to the end of the year”. The firm notes that early signs are already hinting at weaker momentum, although the information appearing in official data releases has been lagged.
According to the bank, this lagged profile has so far contributed to relatively contained foreign-exchange volatility. Despite that, Goldman Sachs maintains that the direction of travel for the underlying data should ultimately reinforce a weaker outlook for the dollar as the year progresses.
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Macro Backdrop and Policy Expectations Pressure the Greenback
Beyond the data flow, Goldman Sachs points to a combination of macro and policy-related factors that it believes will weigh on the U.S. currency. The bank cites a more stable global risk sentiment backdrop and prevailing expectations for Federal Reserve rate cuts as additional headwinds for the dollar over this period.
These elements, in Goldman Sachs’ view, add to the case for dollar softness as investors reassess relative monetary policy paths and risk appetite across major markets.
Cross-Asset and Cross-Currency Drivers
Goldman Sachs also underscores several currency-specific dynamics that could reinforce a weaker dollar profile across key FX pairs:
| Driver | Currency Pair / Market | Impact on Dollar |
|---|---|---|
| Stronger intervention warnings by Tokyo to limit upside in USD/JPY | USD/JPY | Acts as a cap on dollar gains versus the yen |
| GBP resilience following a more benign UK budget | GBP vs USD | Supports the British pound and weighs on the dollar |
| Renewed strength in the CNY | CNY vs USD | Provides an additional source of pressure on the dollar |
The bank characterizes these developments as broadly supportive of a softer dollar across major currencies, complementing the macro and policy narrative.
Credit Agricole Aligns on Year-End Dollar Weakness
In a similar vein, Credit Agricole has linked a range of factors to its own view that the dollar should weaken into year-end. Referring to its earlier analysis, the bank highlighted that “Seasonal patterns, fundamentals point to dollar selling in December – Credit Agricole”.
Together, the perspectives from Goldman Sachs and Credit Agricole underscore a growing consensus among these institutions that multiple macro, policy, and currency-specific forces are aligned against the dollar as the year draws to a close.
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