Forex Institutional Research: Goldman Sachs Global FX Analyst
Key quotes from the report:
Still positive on the Dollar despite market pressure.
“The recent sharp decline in market sentiment has put the USD under pressure. Market worries include the possibility of a US recession, devaluations in the CNY and the impotence of the ECB and BoJ in their fight against low inflation. We push back on these market views. We continue to expect healthy US growth leading to Fed rate hikes, only a modest weakening of the CNY and both the ECB and BoJ to remain committed to their inflation target and to ease further. We continue to expect EUR/$ at 0.95 and $/JPY at 130 in 12 months.”
Volatility in oil prices.
“Oil prices continued to grind lower coming into the year, finally breaching the $30/bbl mark early in mid-January. Concerns that a global growth slowdown was behind the further decline in oil prices exacerbated market pressures, damaging risk assets, including EM FX. While we do not share this view and think that oil oversupply (rather than weaker demand) was in the driving seat, we do expect to see a highly volatile and trendless market until the oversupply is corrected. The last two weeks have seen a brief recovery in oil prices, and this has helped to stabilise EM currencies more broadly”.
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