Anna 
According to analysts at Goldman Sachs, the U.S. dollar has been trading within narrow ranges against major currencies, and this trend is expected to persist for some time, delaying any significant divergence.
At 05:20 ET (09:20 GMT), the Dollar Index, which measures the greenback against a basket of six other currencies, remained unchanged at 104.330. This stability follows a week where the dollar lost approximately 1% following softer-than-expected U.S. inflation data.
Goldman Sachs analysts, in a note dated May 17, stated, “We think there is only limited room for the market to press Dollar shorts on the back of the inflation news.” They noted that while the inflation figures were mostly in line with expectations, they fell short of the target. Consequently, the news does not significantly alter the policy outlook beyond reinforcing recent rhetoric.
The response from the market mirrors the post-March Federal Open Market Committee (FOMC) FX reaction, where the reaction to ‘dovish dots’ stalled not due to fresh data, but because foreign exchange remains a relative game, and the fundamentals of the dollar have not changed substantially, according to the investment bank.
Goldman Sachs further emphasized that the rally in front-end rates appears to be more consistent with cyclical concerns rather than dovish expectations. They highlighted the significance of this for foreign exchange, indicating that there is a narrow path for the dollar to depreciate broadly when growth begins to soften. This is particularly relevant in the current economic environment, where faster Federal Reserve cuts would likely be met with easier monetary policy abroad as well.
