Goldman Sachs highlights a significant shift in FX market dynamics, with macroeconomic indicators supporting a stronger U.S. Dollar. Changing terms of trade are driving strong volatility-adjusted moves across global currency markets.
Downside surprises in China's April data and slowing European PMIs underscore divergent growth outcomes. While Goldman previously expected a weaker dollar, the AI boom and higher energy prices have repositioned the U.S. as an outperformer.
Restricted global commodity flows are boosting the dollar. Underperformance in European currencies and DXY index movements reflect concerns that energy disruptions will constrain economic activity.
Asian central banks are stepping up interventions. Bank Indonesia surprised with a 50bps rate hike to 5.25%. The South Korean Won has weakened due to equity outflows.
Goldman expects the Bank of Korea, Reserve Bank of India, and Taiwan's central bank to tighten policy later this year, while Malaysia and Thailand hold rates steady.
