Fed dot plot to determine near-term direction in the US dollar – Goldman Sachs

Analysts at Goldman Sachs offer their near-term outlook on the US dollar, citing that it depends on the Fed’s dot plot graph.

Key quotes

“The currency's near-term direction will likely be determined by the Fed: if the "dot plot" at this week's FOMC meeting shows a two-hike median for 2022 we may see the recent weakness extend while a baseline of three or more hikes for 2022 would likely result in a return to USD appreciation.”

“Beyond this month, incoming inflation data will likely set the course for the Dollar.”

“There is a wide range of possible outcomes. In our baseline outlook—which envisions three Fed rate hikes next year alongside solid global growth—we see a range-bound USD vs EUR and most other G1Os, but decent gains vs USD for a number of EM crosses.”