Goldman Sachs has upgraded its dollar forecast, predicting a 5% rally over the next year due to robust U.S. economic growth and the likelihood of higher tariffs. The strong U.S. labor market and resilience in growth have bolstered the dollar's outlook, with Goldman strategists emphasizing risks skewed toward further appreciation.
The bank now projects the euro falling to 0.97 against the dollar within six months, its lowest since 2022, and the pound declining to 1.22 in the same timeframe. The Australian dollar is forecast to drop to 0.62 US cents in three months, reflecting a broadly stronger greenback.
This marks Goldman’s second dollar upgrade in two months, reversing its earlier cautious stance post-Fed pivot in September. Since then, the US Dollar Currency Index (DXY) has surged over 8%, fueled by Trump’s tariff proposals, which could spur inflation and challenge monetary easing globally.
Investor sentiment aligns with Goldman's bullish outlook, with dollar-long positions at their highest since 2019, according to CFTC data. Goldman warns that continued U.S. economic resilience and the more disruptive impact on rate-sensitive economies could drive further dollar strength.
“While tariff policy changes remain a factor, we believe the dollar's upward trajectory has more room to run,” the strategists concluded.