Goldman Sachs: Remain Long USD Into Month-End, TACO Not Necessarily USD Negative This Time - FJElite

Yesterday was probably the quietest session we have experienced since the war started, with volumes well down on average across almost all pairs. However, despite the low activity and equities finding some support, the DXY retested (and continues to test) the key resistance level flagged in yesterday’s note (100.40/60), likely driven by month-end flows which we expect to skew USD positive. While the dollar has been supported by a rise in the negative beta to risk this month (as discussed by GS FX Research yesterday), we would also note signs of US asset outperformance (or at least not underperformance, as per the pre- March trend) has also seemingly supported the dollar. GS Trading continue to run a long USD position (mainly via EUR & GBP), arguing that there remains too much optimism priced across markets of an end to the conflict, while other short-term factors also support the trade.

As per The WSJ article overnight which hints at a full scale TACO - Trump Tells Aides He’s Willing to End War Without Reopening Hormuz - the US asset performance theme could continue given stronger positive beta to commodity prices relative to other economies. On the timing of any potential TACO (I would caveat with I don’t think Trump actually knows...), we haven’t yet reached the same scale of equities trough experienced around Liberation Day, but the recent trend is interestingly not dissimilar.