Goldman Sachs say USD/JPY could reach 155 & GBP/USD drop under parity – here’s how

This
via the folks at eFX.

For
bank trade ideas, check
out eFX Plus.
For a limited time, get a 7 day free trial, basic for $79 per month
and premium at $109 per month. Get
it here.

• Goldman Sachs maintains a bullish bias on the USD over the coming weeks.
• “We still see more Dollar strength ahead. But how far could the Dollar go? From a top-down perspective, our macro strategists estimated that the Dollar could rise about 8% in a “hawkish Fed” scenario. The broad Dollar has strengthened a bit since that estimate was published, so we still think 5%-7% of further Dollar upside seems like a reasonable range along a more hawkish policy path from the Fed,” GS notes.
• “From a more bottom-up perspective, we have written that EUR/USD could fall 5% in our economists’ more severe recession scenario, and we think it is best to think of that as a benchmark for potential Euro underperformance against the broad Dollar trend.
• On Sterling, we think cable can fall to 1.05 as the market adjusts to the new policy mix, and could potentially go below parity if policy stays on the current course for longer than we currently expect.
• In Asia, we expect USD/CNY to renew its move towards 7.20, and we have argued that USD/JPY could rise to 155 if US 10y rates rise to 4.5% and the Boj sticks to its YCC policy,” GS adds.