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There's more material weakness ahead for the Dollar, says a Goldman Sachs strategist.
"The premium valuation for the USD can continue to erode. The multiyear trend towards dollar strength has broken and I can see material further weakness from here," says Josh Schiffrin, Chief Strategy Officer at Goldman Sachs' Global Banking & Markets division.
The Dollar index - a measure of broader USD performance against a basket of key currencies - is down 8.40% in 2025. At the same time, the Euro has advanced by 9.80% against the Greenback.
"While it feels like the trading community has now embraced this theme, I don’t think that will be an impediment to a structural trending bear market over time (though local pullbacks may be sharp)," says Schiffrin.
The Dollar's weakness has surprised many analysts and investors, as the textbook at the start of the year said Donald Trump's tariff and domestic economic policies were outright bullish for the USD.
However, global investor confidence in the U.S. is on the wane as the U.S. turns more protectionist and erratic, while evidence suggests the tariffs will materially slow U.S. economic growth, thus eroding U.S. economic exceptionalism.
"I continue to think USD puts are a good hedge for a risky asset portfolio the level of volatility is not yet punitive. And it's possible that if the weaker USD materialises, it overshoots and drives volatility across asset classes," says Schiffrin.
He thinks a "good target" for the Euro-to-Dollar exchange rate is 1.25.
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Elsewhere, the strategist says to stay bearish on oil.
"This story feels really strong, aided most recently by the OPEC supply increases and can continue to provide an important disinflationary (and highly visible) offset to any tariff price-driven increases," he explains
"I think this has much further to go and oil can get down to $45."
