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Goldman Sachs

Global FX Strategy 2026

LIVE10 January 2026USD bearish
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Macro Scenarios

Goldman Sachs EUR/USD scenario analysis and USD macro framework

EUR/USD Fair Value by Scenario

Base case highlighted in red

Rate Spread Sensitivity

Fed-ECB spread vs EUR/USD fair value

Fed vs ECB Rate Assumptions

Central bank rate assumptions across scenarios

ECB cuts, Fed unchanged
1.12

Most bearish EUR/USD outcome. Additional ECB cuts while Fed stays on hold. Even in this scenario, EUR finds support from fiscal tailwinds.

Fed
4%
ECB
1.5%
Spread
-2.5bp
Fed holds, moderate ECB easing
1.17

Fed holds higher for longer with only modest ECB easing. EUR supported by fiscal but constrained by rate differential.

Fed
3.75%
ECB
2.25%
Spread
-1.5bp
Synchronized easing - base case
1.22

Base case. Both central banks ease, but Fed delivers more cuts. European fiscal expansion provides additional EUR support beyond rate differentials.

Fed
3%
ECB
2.25%
Spread
-0.75bp
Fiscal re-rating scenario
1.25

Goldman base case target. European fiscal expansion fully priced, ECB terminal higher than expected. EUR structural re-rating in full effect.

Fed
3%
ECB
2.5%
Spread
-0.5bp
US recession, aggressive Fed cuts
1.3

US recession triggers aggressive Fed easing. Dollar weakens broadly. EUR/USD overshoots to 1.30+ before stabilizing. Twin deficits amplify dollar weakness.

Fed
2%
ECB
2%
Spread
0bp

USD Macro Scenario Matrix

Growth x Inflation framework for the dollar

RecessionSoft
Sharply Bearish → twin deficits amplify weakness

USD weakens 10-15% on TWI. Safe haven flows initially support JPY and CHF but EUR also rallies as fiscal cushion perceived. EM carry unwinds violently. Gold surges.

Carry: Carry devastated, unwind rapidly
RecessionFirm
Stagflation → initially messy, then USD bearish

Stagflation worst for USD as Fed credibility questioned. Fed independence concerns amplify dollar weakness. EUR/USD could overshoot to 1.35. JPY and CHF benefit most.

Carry: Carry collapses
Below trendSoft
Bearish → Goldman base case

USD weakens selectively - 'Different Dollar Downside'. EUR and JPY capture most of the move. Commodity FX benefits from global growth resilience. DXY to 93 by year-end.

Carry: EM carry delivers solid returns, selectively
Below trendFirm
Range-bound with bearish lean

Offsetting forces. Fed on hold supports USD carry but twin deficits weigh. EUR range-trades 1.15-1.22. JPY grinds lower against USD. EM carry mixed.

Carry: Mixed - high yielders outperform
Above trendSoft
Moderately bearish → global risk-on

Pro-cyclical USD weakness as global growth accelerates. Risk appetite favors commodity FX and EM. EUR/USD 1.20-1.25. AUD and NOK outperform. JPY lags.

Carry: Carry strongly positive
Above trendFirm
Neutral to modestly bullish → US exceptionalism returns

Strong US growth and firm inflation keep Fed on hold or hiking. USD supported but gains limited by twin deficits. EUR/USD consolidates 1.12-1.18. EM carry outperforms.

Carry: Carry outperforms cross-sectionally