Investing.com – The U.S. dollar has been trading softly against major currencies lately, and Goldman Sachs says these tight ranges are likely to persist for some time and divergence will have to wait.
At 05:20 ET (0920 GMT), the dollar index, which tracks the dollar against a basket of six other currencies, was unchanged at 104.330, having stabilized after losing about 1% last week following weak inflation data. in USA.
“We believe there is limited room for market pressure on dollar shorts amid inflation news,” Goldman Sachs analysts said in a May 17 note.
“In the end, although the prints were largely as expected, they were not fit for purpose. As a result, this news does not change the political outlook much, but rather reinforces recent rhetoric.”
The subsequent market reaction was reminiscent of the forex market reaction after the March FOMC meeting, when the dovish dot reaction stalled not because of fresh data, but because the forex market was still a relative play and dollar fundamentals had not changed much. added the investment bank.
And this time, we believe the rise in interest rates is more in line with cyclical concerns than dovish expectations.
“This is important for the foreign exchange market because the dollar has a narrow path to depreciation overall when economic growth slows,” the bank added. “This is especially true in the current environment, where faster Fed cuts are likely to be met with easier policies abroad as well.”