Financial Associated Press September 24th (Editor Huang Junzhi), after the Federal Reserve kicked off a loose cycle with a "radical" 50 basis point move last week, Goldman Sachs lowered its expectations for the US dollar against various currencies.

The bank anticipates that as US Treasury yields decline to weaken the attractiveness of the dollar, the dollar will gradually weaken. Subsequently, the bank raised expectations for several major currencies such as the euro, British pound, and yen.

Last week, the Federal Reserve cut interest rates by a significant 50 basis points to boost the US labor market. Goldman Sachs stated that this decision indicates that US policymakers are willing to take more proactive measures to address economic downturns than other countries.

Goldman Sachs strategists, including Kamakshya Trivedi, wrote in a report: "Over time, this balance should mean a softer dollar, but we still expect this to be a gradual and uneven process. We also still believe that the overvaluation of the dollar will not be eroded quickly or easily but the threshold has been slightly lowered."

With the new view on the US dollar, Goldman Sachs is now more bullish on the British pound, expecting the pound to rise from the previous $1.32 to $1.40 in 12 months. The last time it reached this level was in 2021, also one of Wall Street's highest forecasts.

The bank's call is based on the larger interest rate cuts by the US and European central banks, while the Bank of England is unwilling to accelerate its rate cuts. Despite many strategists and investors suggesting that the Bank of England will eventually need to catch up with rate cuts, Goldman Sachs states that the UK economy remains strong.

"Support for the British pound comes from risk beta values, steady growth momentum, and a patient Bank of England. The market has already priced in the risk of a US economic downturn, benefiting risk assets and pro-cyclical currencies like the pound." wrote the strategists.

In addition, Goldman Sachs has also raised its forecast for the euro, currently expected to rise to $1.15 in 12 months, up from the previous forecast of $1.08. The institution predicts that during the same period, the yen exchange rate will rise to 140 yen to the dollar, compared to the previous forecast of 150 yen to the dollar.

Finally, Goldman Sachs also raised its expectations for the Renminbi, with the Renminbi to US dollar exchange rate expected to rise from the previous forecast of 7.40 to 7.25 within 12 months.

It is worth mentioning that the forecasts of Goldman Sachs sharply contrast with the views of Deutsche Bank strategists. The Deutsche Bank strategist believes that the Fed's rate cuts will not significantly impact the dollar's high yield status.

Deutsche Bank's forex strategist, led by George Saravelos, wrote in a report: 'We believe that the Fed's pricing is too mild, and the market underestimates the positive dollar risk surrounding a Trump victory, so we prefer to buy the dollar.'