Goldman on their general view of the USD as well as a few points on Jackson Hole this week:
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Base case: USD likely to depreciate as US growth no longer justifies its high valuation; softening labor market reinforces this view.
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Jackson Hole: Expect similar to last year—officials outline scope to ease without firm commitments but those hoping for explicit policy signals may be disappointed.
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Rates: Incoming data and Fed speak suggest more room to run in front-end rates, and their house view is for three 25bp cuts.
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Macro implication: Lower ‘breakeven’ payrolls and tighter labour supply imply weaker potential growth and a lower short-term neutral rate, which should both be negative for the USD.
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Inflation: Recent prints (including PPI) point to consumer prices not constraining policymakers; PPI mainly highlights a volatile, uncertain operating backdrop for firms.
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FX momentum: Recent USD downside came in quiet markets and from foreign drivers, showing path of least resistance is lower.
This article was written by Arno V Venter at investinglive.com.