Dollar's stability appears vulnerable — Goldman Sachs

Goldman Sachs analysts note that renewed strength in US assets has supported the dollar’s rebound. However, this poses the biggest risk to the bank’s bearish outlook on the currency. The US Dollar Index rose 1.7% in July, after dropping nearly 12% in the first half of the year.

However, Goldman Sachs expects that more balanced global returns will encourage further diversification away from American assets amid ongoing policy uncertainty.

The bank reports that while there was an initial selloff following tariff announcements, the more severe market reaction came after their implementation amid escalating US-China trade tensions.

Additionally, the greenback could be impacted by potential leadership changes at the Fed. Goldman Sachs also states that the unstable correlation between the dollar and US stocks may trigger more hedging activity.