Synopsis:

Goldman Sachs recommends going long USD/SEK to hedge against elevated US rates and rising FX volatility driven by expected tariff-related policy moves in 2025.

Key Points:

1. Policy-Driven Volatility:

   • With tariffs expected to dominate US trade policy, FX volatility is likely to surge, making portfolio hedging critical.

2. US Economic Resilience:

   • Goldman expects above-consensus US growth with limited recession risks, supporting the USD through higher yields and resilient economic performance.

3. Long USD/SEK Trade Recommendation:

   • Entry: Current levels
   • Target: 11.25
   • Stop: 10.75
   • This trade offers an attractive hedge against persistent high US rates and broader trade war risks that could roil markets.

Conclusion:

Goldman Sachs sees long USD/SEK as the optimal hedge against potential US policy-driven FX volatility and higher-for-longer US rates. The pair’s upside potential provides strong protection in an increasingly uncertain geopolitical and economic environment.