Goldman Sachs: Key Themes in updated FX forecasts

<p>Key Themes:</p><ol><li><p>Revisions in Rate-Sensitive Currencies:</p><ul><li>Goldman Sachs has made significant revisions in forecasts for currencies sensitive to interest rate changes, notably JPY, SEK, and IDR.</li><li>These adjustments primarily reflect the observed shifts in these currencies over recent months, moving away from a "higher for longer" rates scenario.</li></ul></li><li><p>Potential in Pro-Cyclical Currencies:</p><ul><li>The firm identifies substantial potential in pro-cyclical currencies, such as KRW, ZAR, AUD, NZD, and GBP.</li><li>These currencies are expected to benefit from the Federal Reserve's easing of financial conditions, contributing to the likelihood of a global economic soft landing.</li></ul></li><li><p>Moderate Returns in Key Challenger Currencies:</p><ul><li>Despite the forecasted USD weakness, Goldman Sachs anticipates relatively moderate returns from key challenger currencies like EUR, CNY, and JPY.</li><li>This outlook is based on various domestic challenges and idiosyncrasies these currencies face.</li></ul></li></ol><p>Conclusion:</p><p>Goldman Sachs' updated FX forecasts envision more pronounced USD weakness, with the most substantial revisions in rate-sensitive currencies. The bank sees notable opportunities in pro-cyclical currencies benefiting from a softer monetary stance by the Fed. However, returns from key challenger currencies are expected to be more contained, reflecting their unique domestic challenges. These themes collectively suggest a shift in the FX market dynamics, with implications for investors and traders focused on currency movements.</p><p>For bank trade ideas, <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1703015814323000&amp;usg=AOvVaw1jdIpGK1l78dpeTRWyKk8a">check out eFX Plus</a>. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1703015814323000&amp;usg=AOvVaw1jdIpGK1l78dpeTRWyKk8a">Get it here</a>.

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This article was written by Adam Button at www.forexlive.com.