US dollar to continue its upward trend in the short term – Goldman Sachs

Economists at Goldman Sachs expect US Dollar strength to continue in the near term.

There will likely only be a ‘bumpy deceleration’ for the Dollar

“The foreign exchange (FX) markets have been pricing too much divergence, but recent data showing better-than-feared credit conditions in the US and easing cost pressures have resulted in a rally in the broad Dollar. Concurrently, economic growth in Europe, China, and Japan has not met robust expectations, and policymakers in these regions have displayed increased caution, supporting the strength of the USD against major currencies.”

“Despite these developments, there will likely only be a ‘bumpy deceleration’ for the Dollar. This is because slack in the US economy remains limited and robust global activity usually accompanies Dollar depreciation, not US underperformance. We expect these factors to contribute to further Dollar strength in the near term.”