The firm highlights historically high carry levels and low volatility as key drivers for G10 currencies in coming months.
Goldman Sachs expects the FX carry trade to extend its outperformance in the second half of the year, driven by widening rate differentials. The firm argues that carry strategies, particularly those funded by low-yielding currencies like JPY, CHF, EUR, and CAD, remain attractive amid subdued volatility and elevated yield levels not seen since 2000.
Major currencies have largely tracked dollar sentiment and rate spreads this year, with limited volatility outside the Japanese yen. Rising energy prices, linked to geopolitical tensions, have shifted Fed policy expectations, further supporting the carry trade outlook.
Goldman notes that G10 FX markets currently offer a rare combination of high carry and low volatility, reinforcing the case for carry strategies in the near term.