US dollar: Risks skewed to the downside in 2020 – Goldman Sachs

The Goldman Sachs Research Team published its outlook for currencies in 2020 late Monday, with the key highlights found below.

“Risks to the dollar are arguably skewed to the downside, and we would pivot to a more bearish outlook if we were to see (i) a more robust recovery in the Euro Area, (ii) a bigger rollback of tariffs on China, and/or (iii) more rate cuts from the Fed. 

The euro is 15% undervalued and that positioning in shorts is overcrowded. However, not confident that a turn is coming soon and forecast a rise to 1.15 in 12 months.

Expect a deal dividend to push Cable to 1.35 in three months and 1.37 in 12 months.

There have already been large inflows as the probability of a cliff-edge exit diminished over the last couple months, but this has barely dented the overall picture of a material Sterling underweight.

See a strong upside case for the Swedish krona, particularly against the euro.

Most-negative on the Swiss franc.

See a positive case for NZD against AUD and USD.

See CAD broadly range-bound versus USD.

Like the LatAm region and believe MXN is the best bet.”