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Jan 15 - 06:55 PM

Goldman Sachs: USD to Rally 5% in 2025 on Tariffs and US Outperformance

By eFXdata  —  Jan 15 - 04:00 PM

Synopsis:

Goldman Sachs forecasts a 5% USD rally this year, citing tariff policies, resilient US economic data, and shifting Federal Reserve expectations as primary drivers of Dollar strength.

Key Points:

  1. Tariff Risks Not Fully Priced:

    • FX markets face challenges in preemptively pricing tariff policies, as movements in the CNY fix will heavily influence the broad market response.
  2. Upgraded US Growth Outlook:

    • Contrary to initial expectations of a negative growth response to trade policy shifts, markets have upgraded their US growth outlook since the election, supporting the USD.
  3. Fed Policy Path and Economic Resilience:

    • Strong US inflation and labor market data have led Goldman Sachs economists to revise their Fed expectations, projecting a longer "pause" rather than a brief "skip."
    • This policy outlook aligns with continued USD outperformance in the near term.
  4. Revised Dollar Forecasts:

    • Goldman Sachs now projects the USD to rally approximately 5% over the year, driven by the realization of new tariffs and sustained US economic resilience.

Conclusion:

The USD is poised for further gains in 2025, supported by tariff policies, an upgraded US growth narrative, and hawkish Fed adjustments. FX investors should anticipate continued Dollar strength, particularly as global markets react to shifting US trade and monetary policy dynamics.

Source:
Goldman Sachs Research/Market Commentary

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