Dollar to remain bullish - Goldman Sachs

By FXstreet.com | Updated July 30, 2014 AAA

FXStreet (Łódź) - Robin Brooks and Fiona Lake, analysts at Goldman Sachs remain of the view that the drivers of USD against the major currencies– interest rate differentials, shifts in the oil balance in the US, safe-haven demand and reserve recycling – continue to point to USD strength.

Key quotes

"We continue to favour the USD against EUR, JPY, AUD and CAD."

"The 2-year rate differential of the US versus the trade-weighted G10 has risen to its most Dollar supportive level since 2009, as underscored also by our US economics team bringing forward their date for the first rate hike to Q3."

"The ECB has eased, pushing the Euro weaker. The Euro has weakened from 1.40 to 1.35 in expectation of and subsequent delivery of ECB easing at its June meeting."

"We expect ECB easing to trump the solid Euro area external surplus and cause the Euro to weaken over the next 12 months."

"The USD/JPY has been stuck between 101.5 and 102.5 since early April."

"BoJ easing is likely to take the form of doubling the purchase amount of ETFs to JPY2trn, and the October meeting may also confirm that QQE will be continued into 2015. Our forecast is 110 in 12 months' time."

"CAD and AUD are trading much stronger than interest rate differentials would suggest. However dovish commentaryfrom both central banks is likely to catalyse incremental weakness."

"We recently upgraded our GBP forecasts, where we now foresee a 5.8% appreciation on a trade-weighted basis over the next 12 months, the bulk of which against the Euro. Our new EUR/GBP path is 0.78, 0.77 and 0.75 in 3, 6 and 12 months."

"The CNY fix is becoming more volatile."

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