Goldman Sachs Forecasts Dollar Headwinds in 2024 Despite Robust US Economy

Goldman Sachs Group Inc. strategists, led by Kamakshya Trivedi, predict a potential dimming outlook for the dollar in 2024.

Despite the greenback’s current strength, up approximately 1.6% this year, the strategists foresee a nuanced depreciation rather than a sharp downturn, citing a better-balanced global economy over the coming year.

The Federal Reserve’s commitment to maintaining elevated interest rates to combat inflation contributes to the dollar’s resilience.

The strategists acknowledge above-consensus views on US growth and higher yields, indicating a high bar for total return prospects.

While anticipating a challenging ascent for the euro to $1.10 in the next year, supported by economic recovery, they highlight risks such as weaker growth affecting sovereign credit and potential energy price shocks.

Additionally, they foresee the yen facing disappointment in Japan’s policy normalization progress, predicting a fall to 155 per dollar in the next six months.

In the case of the pound, the near-term outlook suggests added pressure due to cable’s sensitivity to real rates.

Limited upside is expected as long as the Bank of England remains cautious about restarting rate hikes, with the pound anticipated at $1.18 over the next three months.