Dollar crosses respond to Fed surprises – Goldman Sachs

Research Team at Goldman Sachs, suggests that the dovish shift in Fed communications has taken the Dollar weaker, and markets now price less than two 25bp hikes over the coming three years.

Key Quotes

“While recent speeches have been dovish, Fed-speak has also been quite erratic, with the abrupt hawkish shift in May still prominent in the minds of many investors.

We take an agnostic look at which Dollar crosses react most to Fed surprises, finding that GBP/$, $/JPY and NZD/$ are the most sensitive over the past 3 months. We expect these crosses to move the most should there be a surprise on Friday.”