Goldman Sachs, a big name in banking, thinks the US dollar is going to weaken. Why? Because the Federal Reserve (the US central bank) is cutting interest rates.
Lower Rates, Weaker Dollar?
Lower interest rates make it less attractive to hold US dollars, so Goldman Sachs expects the dollar to lose value against other major currencies like the euro, pound, and yen. They even predict the euro and pound will rise in value against the dollar.
A Gradual Decline
Goldman Sachs doesn’t think the dollar will crash overnight. They expect the decline to be slow and uneven. They also say that the dollar is still considered valuable, so it won’t lose its strength easily.
Not Everyone Agrees
Not everyone is on board with Goldman Sachs’ prediction. Deutsche Bank, another big bank, thinks the dollar will actually strengthen if Donald Trump wins the US election. They think the market is underestimating the positive impact of a Trump presidency on the dollar.
The Bottom Line
It’s still too early to say for sure what will happen to the dollar. But Goldman Sachs’ forecast is a reminder that the Fed’s interest rate decisions can have a big impact on the value of the dollar.
