Goldman Sachs sees broad dollar strength as energy shock keeps yields elevated

What the desk is arguing

Goldman Sachs sees the ongoing energy price shock sustaining higher US yields and driving broad dollar strength across G10 currencies. The bank's preferred positions are long USD against the Swedish krona, euro, and British pound, citing the US' insulation as a top oil producer.

The thesis rests on persistent inflation and resilient US growth, which have already produced higher-for-longer yields. Any prolongation of the energy shock reinforces the dollar's terms-of-trade advantage, with haven flows adding support since late February's geopolitical events.

Implicitly, Goldman is rejecting the view that yield differentials have peaked or that the Fed will cut rates soon. They also counter the notion that FX intervention in Japan can stem yen weakness without macro policy adjustment.

Where it sits in our coverage

Our internal consensus target for EUR/USD stands at 1.075 (Dec-26), with a range of 1.04–1.12. This aligns with Goldman's bearish euro view, as our target implies further downside from current levels near 1.10.

Specific firm targets: - JPMorgan: 1.10 (Mar-26) – aligned, but less aggressive than Goldman. - Barclays: 1.07 (Dec-26) – aligned, similar magnitude. - BofA: 1.04 (Dec-26) – aligned, more bearish.

No contrary firm targets were cited for EUR/USD.

How other firms see it

The consensus broadly aligns with Goldman's dollar bullishness. JPMorgan also favors dollar strength on energy disruption, while Barclays echoes higher-for-longer yields.

A contrary view comes from BofA, which sees the Fed cutting by H2 2026, capping dollar upside. However, this is a minority stance given the current macro setup.