Goldman expects additional Fed rate hike in March
Goldman's outlook for an additional Federal Reserve rate hike in March underscores a bullish stance on the USD, reflecting growing conviction around tightening monetary policy. This prediction aligns with recent economic indicators suggesting persistent inflationary pressures. As markets anticipate this potential hike, the dollar is likely to regain momentum, supported by a shift in risk sentiment and the need for yield amidst a volatile environment.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). This perspective on Fed tightening aligns closely with the positive bias from other firms like JPMorgan as they mirror the prevailing outlook on USD strength.
How firms align
Aligning with Goldman's prediction, JPMorgan maintains a target of 1.10, suggesting a bullish sentiment towards the USD as they anticipate further confirmation of Fed rate hikes. Conversely, BofA presents a contrary view with a lower target of 1.04, reflecting a more cautious stance amid potential economic headwinds. Refer to our internal reports for detailed analyses.
What the data shows
Recent economic data points towards rising inflation, which will likely contribute to continued hawkish rhetoric from the Fed. It is essential to monitor upcoming economic releases, as they could influence revisions to current forecasts and firm positions. See our Insight at /research/inflation-pressures for more details.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Goldman's March rate hike expectation could reinforce USD strength.
- 02Traders should anticipate volatility as markets adjust to rate hike signals.
- 03Watch for shifts in economic data that may alter Fed expectations.
- 04Positioning leading up to March will be crucial as expectations solidify.
Market implications
Next, monitor the upcoming Federal Reserve meeting and any economic releases that could sway expectations. A sustained USD strength could hold the EUR/USD near our consensus target of 1.075, while movement beyond 1.10 may signify stronger bullish momentum from the dollar.
Risks to this view
Downward pressure on the USD could emerge if labor market data unexpectedly softens or if inflation projections are revised lower. Any indication of a pause in rate hikes could reverse this bullish sentiment quickly.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.75
Firms mentioned
Sources & References
How we cover this story
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