As US bond yields continue to soar, so do expectations for a rise in the dollar, but Goldman insists that the dollar will continue to fall.
There are three main reasons why Goldman is bearish on the dollar.
First of all, from the current market pricing, the expectation of the Fed to raise interest rates is more hawkish than Goldman Sachs's.
Judging from the (OIS) curve of the overnight index swap rate in the US, the market expects the Fed to raise interest rates for the first time around January 2023, and the benchmark federal interest rate is expected to reach 0.7 per cent by the end of 2023.
But Goldman Sachs does not expect the first rate hike to happen until 2024, as do median expectations for Fed officials.
Second, Goldman Sachs expects strong GDP growth in most economies next year because they will benefit from post-vaccination normalisation, not just the US.
Economists at Goldman Sachs expect GDP growth of 7.4 per cent in the US, 7.1 per cent in the eurozone and 11.6 per cent in the UK over the next four quarters.
Third, from a bottom-up perspective, Goldman takes a positive view of the renminbi, which accounts for 14 per cent of the dollar's trade-weighted basket, undermining Goldman's optimism about the dollar's outlook.
