Goldman Sachs Fed view: balance of risks toward further tightening, not cuts later in 2023

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  • Goldman Sachs sees the USD staying offered in the near-term before rebounding later in the year.
  • “Taking a step back, in late 2022, we and consensus generally expected Dollar strength to persist somewhat longer given expectations of sluggish global growth and elevated policy risks, before eventually clearing the way for more sustained Dollar downside. We now see a rising case that this is instead playing out in reverse,” GS notes.
  • “And we still see the balance of risks pointed towards potentially further tightening needed, rather than rate cuts later this year (consensus among economists generally goes the other way). At the same time, our commodity strategists expect that stronger global activity growth will eventually push prices higher again. We therefore still see some important limitations on current market trends, but no clear reversal catalysts over the near term,” GS adds.

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