Synopsis:

Goldman Sachs discusses the current foreign exchange landscape, highlighting the challenges in advocating for new USD shorts following recent developments with the Fed and CPI data.

Key Points:

• Market Dynamics: Recent data and Federal Reserve actions have blurred the clear divergence in monetary policy that had previously supported a bearish USD outlook.
• Carry Trade Interest: There is a renewed interest in carry trades, indicating a shift in market sentiment towards holding currencies with higher yields.
• Strategists' View: Goldman Sachs strategists see limited potential for further pressing USD shorts, given the current market conditions.
• Trading Position: The current positioning in various currency pairs makes it challenging to recommend initiating new USD shorts.

Conclusion:

In light of recent economic indicators and central bank activities, Goldman Sachs advises caution against establishing new USD short positions. The current environment suggests a more complex and less predictable FX market, with limited opportunities for leveraging USD weaknesses.