Global FX 2026 Outlook: Different Dollar Downside - Goldman Sachs
At a Glance
Goldman Sachs' 2026 outlook argues for a different type of dollar downside, potentially driven by structural shifts rather than cyclical factors, implying a more sustained weakening trend.
Key Takeaways
- 01Goldman Sachs sees a structural dollar decline, not just cyclical weakness.
- 02EUR/USD targets among consensus point to gradual depreciation, with Goldman at the bearish end.
- 03Key risk is that the dollar remains resilient if US growth outperforms.
Full Analysis
What the desk is arguing
Goldman Sachs' 2026 outlook identifies a different pattern of dollar downside, suggesting structural rather than cyclical drivers. The thesis is that the dollar's strength has peaked, and a multi-year depreciation cycle is underway.
Supporting evidence includes diverging monetary policy expectations, with the Fed cutting while other major central banks hold or tighten, and valuation metrics showing the dollar is overvalued. The desk also points to rising twin deficits as a medium-term drag.
The counterfactual they reject is the conventional view that dollar weakness is short-lived and driven by risk-on sentiment; instead, they see it as a regime shift.
Where it sits in our coverage
Our consensus target for EUR/USD Dec-26 is 1.075, with a range of 1.04-1.12. This aligns broadly with Goldman's bearish dollar view, though our central forecast is more modest than the aggressive downside they imply.
Specific firm targets include: * JPMorgan: Dec-26 target 1.10 (aligned, but less bearish) * Barclays: Dec-26 target 1.07 (closely aligned) * BofA: Dec-26 target 1.04 (more bearish than consensus)
Goldman's thesis sits closer to the bearish end of our coverage, resembling BofA's stance.
How other firms see it
JPMorgan is aligned on dollar downside but targets a shallower move (1.10) by Dec-26, emphasizing a slower depreciation. Barclays (target 1.07) aligns more closely with a structural bearish view.
In contrast: * BofA (target 1.04) is contrary in that they see an even steeper decline, driven by aggressive Fed cuts, whereas Goldman emphasizes structural factors. * HSBC (not in our direct coverage but known for a bullish dollar view) would be contrary, arguing that US exceptionalism persists.
Market Implications
If Goldman's thesis materializes, sustained USD weakness would boost EUR/USD towards the 1.10-1.15 range, benefiting European exporters and EM currencies. It would also increase pressure on fixed income markets as inflation hedges rise.
From the original
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