More on Goldman Sachs throwing in the towel on US dollar longs
Goldman Sachs has put all its currency forecasts under review and has removed long-dollar trades from its 'Top Trades'.
"The greenback still has a number of things going for it, including a healthy domestic economy, an active central bank, and lower political uncertainty compared with the UK and Euro area," Goldman analysts wrote in a note to clients.
"In recent years we have generally maintained a bullish dollar view, and the greenback still has a number of things going for it, including a healthy domestic economy, an active central bank, and lower political uncertainty compared with the U.K. and euro area,"
"However, a number of fundamentals have changed on the margin, such that the long-Dollar story no longer warrants a place among our 'Top Trades'."
They pointed to the White House and concern there about the strength of the dollar along with improving fundamentals elsewhere. They also pointed to less support from the Fed and softer US data.
'The dollar has not benefited as much as we might have thought from hawkish communication about the funds rate in recent months," they wrote.
Goldman is also beginning to question the reflation trade.
"While we have not changed our view that an acceleration in U.S. inflation will ultimately be seen, reflecting a closing output gap and still accommodative monetary and financial conditions, we would stay on the sidelines for now on the back of the increase in uncertainty over the macro and risk outlook," economists at Goldman Sachs wrote.
