Goldman Sachs: The pound is expected to rise strongly in the coming months, while the US dollar is expected to strengthen for an even longer period of time
Goldman Sachs has released a new one-year forecast, describing the pound as an "unprocessed diamond" and predicting a strong rise in the pound in the coming months.
Kamakshya Trivedi, Global Head of Foreign Exchange at Goldman Sachs, said, "We believe that the bullish pattern of the pound should be synchronized with the broader rise of the US dollar
Given Goldman Sachs' central position in the global financial architecture, new research and forecasts will greatly impact investors' views on the foreign exchange market in the coming months.
Commenting on the forecast that EUR /GBPmay be much higher than 1.20 (i.e. EUR/GBP may fall to 0.8333), Trivedi said, "For most of this year, we have a constructive view of the pound. We believe that the argument that the pound will continue to perform well against the G10 cross currency in the coming months still exists
The comment was released after Trump won the election, and his Republican Party also swept through Congress.
The new US government seems to impact global trade while further boosting the US economy, which can keep US interest rates at a higher level for a longer period of time.
Tariffs may put pressure on the most important export industry in the eurozone, and the Fed's interest rate hike will ultimately boost the US dollar.
Trivedi said, "This is a strong combination for the US dollar. Therefore, we no longer expect the US dollar to depreciate significantly, even in the next 6 or 12 months. The US dollar will strengthen for a longer period of time
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