Goldman sees greenback nearing a ‘messy top’

Bloomberg

As market odds increase that the Federal Reserve will pause its rate-hike path, Goldman Sachs says its prediction for a weaker dollar could come sooner rather than later.
Over the past week, worsening US economic data — including a tepid jobs report — have led some to consider the chance of a Fed pause in 2019. Goldman Sachs joined that cohort when it said the odds of a rate hike at the central bank’s March meeting are now below 50 percent. The reduced expectations, in turn, could mean a near-term decline for the dollar.
“The latest news from the Fed raises our conviction in those forecasts and suggests that dollar depreciation could be more front-loaded than we previously anticipated,’’ Zach Pandl, Goldman’s co-head of global currency and emerging-market strategy, said by phone.
Pandl thinks the dollar could be putting in a “messy top,” and is watching Fed communications, US-China trade discussions and the outlook in the euro area for signals on the course of the greenback. One scenario that Pandl sees as possible: the dollar may be weighed down after the Fed’s December meeting, when officials may reduce projections for 2019 hikes to two from three.
Goldman’s chief economist Jan Hatzius and his colleagues have long been predicting four Fed hikes in 2019 after an expected notch higher by central bank. Yet the cut of March odds shows they see a chance now that there may be less than four.