Strategists at Goldman Sachs Group Inc said that the US currency may remain stronger for longer if the Fed keeps interest rates steady, while other Central banks begin to ease monetary policy. Since the beginning of 2024, the US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies, has grown by 3.4%.
"The divergence in monetary policy between the Fed and other Central banks is likely to support the US dollar for a longer time. In general, we believe that as early as June, the Central banks of Canada, the United Kingdom and the eurozone will begin a cycle of interest rate cuts," the strategists said.
The swaps market is now anticipating around 40 basis points of Fed rate cuts for the end of the year. According to the CME FedWatch Tool, markets see a 0% probability of a 25 basis point rate cut at the Fed meeting in June, a 18.3% probability of a rate cut in July, and a 60.1% probability of monetary policy easing in September. Meanwhile, ECB President Lagarde indicated that a rate cut is possible in June, with the rapid gain in consumer-price growth now largely contained.