Goldman Sachs The Markets
Why markets will be living in a strong US dollar world
Dec 8, 2023
The podcast discusses the projected decline of the US dollar in a slowly declining market, as well as the factors influencing it. It explores the concept of de-dollarization and its challenges, as well as its potential impact on emerging markets. The struggles faced by emerging markets due to the strong US dollar and weaker growth in China are also highlighted.
10:00
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Quick takeaways
- The US dollar is expected to decline slowly and bumpily as the global economy improves, but it is likely to remain strong compared to other major currencies.
- Emerging markets are anticipated to experience a more optimistic outlook in 2024, with the potential for decreased US dollar rates and increased fund inflows, supporting positive total returns.
Deep dives
Central banks expected to start cutting rates in 2024 due to declining inflation
2024 is projected to be the year when most central banks around the world start cutting rates as inflation returns to target levels. The decline in inflation, including core inflation, allows central banks to normalize rates from high levels. Emerging markets have already begun cutting rates, with the ECB, the Fed, and the Bank of England expected to follow suit in that order. This expectation has already impacted interest rates and led to a sell-off in the US dollar.
