Goldman Sachs say the USD is still in a downtrend and cite a number of factors for the case for 'structural $ weakness" to remain:
- USD is overvalued
- US real rates will likely remain deeply negative for a number of years
- the global economy should be on a steady upward path out of the coronavirus recession
"This is a standard recipe for sustained Dollar weakness" say GS
GS then add some 'however', that over the coming weeks recent consolidation may continue:
- due to uncertainty around Covid control
- the Fed policy outlook
- US politics
More on these :
1.US Covid case counts have steadily improved this month
- case growth has picked up elsewhere, including continental Europe
better US trends may not continue through school reopening, but could reduce pessimism around domestic growth over the short-term
2. TIPS yields have started to move sideways as markets have debated the outlook for Fed policy
- Jackson Hole conference this week will keep focus on these issues, and the reaction to the latest FOMC minutes suggests markets will be sensitive to any questioning of Fed support for the Treasury market
3. Republication National Convention this week could support the Dollar if it results in a tightening of the polls
- view that a Biden Administration would raise US corporate tax rates has likely weighed on the greenback
- or if President Trump makes major new announcements on US policy toward China
