Goldman Sachs recently forecasted that the USD will continue to weaken following the Federal Reserve's decision to cut interest rates by 50 basis points. The bank indicated that the rate cut highlights the Fed's willingness to address potential economic downturns, making the USD expectedly weaker against major currencies like the EUR, GBP, and JPY.
Goldman Sachs currently predicts that the EUR/USD will rise by 2.67% and the GBP/USD by 4.47%. The strategists also noted that this balance should gradually lead to a weaker USD, although the process will be slow and uneven. They believe that the USD's overvaluation will not be quickly or easily eroded, but the threshold has slightly lowered.
The support for the GBP stems from its risk beta, robust growth momentum, and the Bank of England's resolve against rate cuts. The market has already factored in the risk of a US recession, benefiting risk assets and cyclical currencies like the GBP.
Goldman Sachs' view on a weakening USD contrasts with Deutsche Bank's prediction. Deutsche Bank believes that President Donald Trump's tenure will ultimately boost the USD's value relative to other currencies. They argue that the market underestimates the positive risk for the USD if Trump wins re-election and still favor a strong USD outlook.
