The Federal Reserve's shift has led to the first "net short position" in the US dollar in three months. Goldman Sachs predicts that the US dollar "will continue to decline."
Goldman Sachs predicts that the US dollar index will fall by more than 3% in the next 12 months, and the Federal Reserve will cut interest rates five times next year.
After the Federal Reserve issued its most explicit signal of a rate cut, Goldman Sachs joined the chorus of "bearish on the US dollar".
Goldman Sachs analyst Michael Cahill pointed out in a report last Friday that after the Federal Reserve signaled a rapid implementation of "non-recessionary rate cuts", Goldman Sachs made comprehensive adjustments to its exchange rate forecasts.
In its previous 2024 currency outlook released on November 10th, Goldman Sachs predicted that the US dollar index would fall by 3% in the next 12 months, with the dollar experiencing only a "mild" depreciation. However, Goldman Sachs now believes that the dollar may be weaker than previously predicted. In addition, most analysts surveyed by the media believe that the US dollar will weaken next year. Goldman Sachs stated in the report:
Our biggest revision is for interest rate-sensitive currencies, which have struggled under a high interest rate regime, such as the Japanese yen, Swedish krona, and Indonesian rupiah.
The USD/JPY exchange rate has changed little in the past six months, at 142, significantly stronger than the previous forecast of 155. In addition, Goldman Sachs has raised its exchange rate expectations for the Australian dollar and New Zealand dollar by at least 9%.
After the Federal Reserve kept interest rates unchanged and the dot plot showed a 75 basis point rate cut in 2024, the Bloomberg Dollar Spot Index fell 1.2% last week, hitting a four-month low. The market is eager to digest up to six rate cuts, while Goldman Sachs economists expect five rate cuts.
According to data from the Commodity Futures Trading Commission, hedge funds and other large speculators turned net short on the US dollar for the first time since September before the meeting. In the week ending last Tuesday, the combined betting positions on major currencies turned into 26,355 net short contracts on the US dollar. The biggest change was in the yen, with more than a 20% decrease in bets on the US dollar against the yen, and nearly a doubling of bets on the US dollar against the pound falling.