Goldman Sachs: Two key reasons USD weakness to persist in 2025

Goldman Sachs maintains its bearish outlook on the US dollar for the remainder of 2025, despite a mildly improved US economic outlook. Structural trade policy shifts and global asset reallocation trends continue to weigh on the greenback.

Key Points:

1. Trade Policy Still a Drag:

   • Although Goldman has revised its tariff rate assumptions lower, the US trade regime remains highly protectionist.

   • Tariffs are expected to suppress real incomes and squeeze corporate margins, leading to persistent economic uncertainty.

   • This uncertainty is likely to dampen investment and pricing decisions, limiting the USD’s appeal.

2. Global Asset Rotation and Diversification:

   • Despite improved equity returns, US portfolios remain heavily concentrated and underhedged against FX risk.

   • Goldman sees greater return potential outside the US, supporting flows into non-USD assets.

   • The back-and-forth nature of US policy shifts further motivates global investors to diversify away from the dollar.

Conclusion:

Goldman Sachs sees continued USD weakness in 2025, driven by lingering trade policy uncertainty and a global portfolio rebalancing away from US-centric allocations. The dollar’s strength is expected to erode gradually as foreign investors reassess their exposure in an evolving macro and policy environment.

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This article was written by Adam Button at www.forexlive.com.