This Week’s Financial News 🌎💱
Global Markets: Goldman Sachs’ 2025 Currency Outlook – A Strong Dollar to Dominate 💪💵
Goldman Sachs has released its 2025 global forex outlook, projecting a continued strong dollar 💲 as the central theme. According to the report, global economic and policy shifts will bolster the dollar’s dominance for years to come.
After the 2024 U.S. elections and Donald Trump’s return to the White House 🏛️, the U.S. economy is at a pivotal moment. Here are three potential policy changes under a Republican-led government:
- Higher Tariffs 📈: Import duties could rise by 3-4 percentage points, impacting trade.
- Lower Immigration 🚪: Stricter policies may reduce annual net migration to 750,000, down from pre-pandemic levels of 1 million.
- Tax Extensions and Cuts 💰: Tax cuts set to expire in 2017 will likely be extended, with additional reductions.
Goldman Sachs expects these policies to have mixed impacts on inflation. While broad tariff hikes could push inflation above 3% 🔥, the effects are likely to be short-term.
In terms of monetary policy, the Federal Reserve is expected to continue rate cuts in early 2025 📉, slowing the pace by mid-year as labor market stability becomes clearer.
Several factors are driving the dollar’s strength:
- Resilient U.S. Economy 🌟: Higher growth rates, strong asset markets 📊, and low unemployment will attract global investors.
- Capital Inflows 📥: As the leading trade and reserve currency, the dollar continues to draw international investments.
- Higher Returns 💹: Global investors seeking better yields will favor U.S. assets, strengthening the dollar further.
Meanwhile, other major currencies may face challenges:
- The euro is projected to weaken further, potentially falling below parity with the dollar. 💶⬇️
- The yen and British pound are also expected to experience downward pressure. 💷📉
However, potential risks remain:
Protectionist trade policies 🛡️ could heighten market uncertainty and volatility.
Faster-than-expected recoveries in Europe and China 🌍🇨🇳 could shift global capital flows, reducing the dollar’s appeal.
Aggressive Fed rate cuts 🏦 may dampen dollar strength.
Australia: AUD Slightly Rebounds Amid Hawkish RBA Outlook 🦘💵
The Australian dollar (AUD) saw a modest recovery this week, buoyed by the Reserve Bank of Australia’s (RBA) hawkish tone on future rate policies. 📈💬
Minutes from the RBA’s November meeting emphasized the importance of maintaining restrictive monetary policies to combat inflation risks 📊. While no immediate cash rate changes are planned, the board remains open to adjustments.
Currently, AUD/USD trades near 0.6510:
- Support Levels ⚠️: The initial support is around 0.6370, followed by the year’s low of 0.6348 in August.
- Resistance Levels 🔼: Resistance lies at the 9-day and 14-day moving averages. A breakout could trigger a rebound to 0.6687, the four-week high.
While the AUD has shown some recovery, it continues to face challenges from the strong dollar 💪 and global market uncertainties. 🌏📉