Divergence back to FX – Goldman Sachs
Goldman Sachs discussed the importance of divergence in a recent note to clients, arguing it will be a key driver of FX for the remainder of the year.
Goldman Sachs explains:
We think this divergence will be an important factor for G10 FX this year. It will help inform currencies respond to a faster or slower recovery than expected, and contribute to a different path for policy in normally closely-linked currency pairs.
The expected timing of policy normalization should support CAD and NOK (both components of our USD short basket) while it may eventually hold back GBP (which we currently recommend vs CHF, due to the UK’s successful vaccine rollout).
Goldman Sachs explains:
We think this divergence will be an important factor for G10 FX this year. It will help inform currencies respond to a faster or slower recovery than expected, and contribute to a different path for policy in normally closely-linked currency pairs.
The expected timing of policy normalization should support CAD and NOK (both components of our USD short basket) while it may eventually hold back GBP (which we currently recommend vs CHF, due to the UK’s successful vaccine rollout).