Key insights
- Goldman Sachs notes US economic data outperformance relative to the UK and Euro Area due to asymmetric energy shock impacts. US growth was already projected to be solid. Rate differentials have shifted dollar-positive, suggesting potential downside pressure on EUR/USD. This implies relative strength for US assets, including equities, compared to European counterparts.
Investing.com -- Goldman Sachs reports that US economic data is showing stronger performance compared to the UK and Euro area, with evidence emerging of diverging regional impacts from energy price shifts.
The composite Purchasing Managers' Index for the US has remained relatively stable since February, while comparable measures for the UK and Euro area have fallen by 4 to 5 points. Goldman's data surprise series indicates clear outperformance in US economic indicators in recent months.
The investment bank attributes the diverging data to asymmetric growth impacts from the energy shock, though initial economic conditions are also considered relevant. Prior to the conflict, Goldman had projected solid US growth baseline supported by fiscal stimulus, easier financial conditions from Federal Reserve rate cuts, and reduced tariff pressures.
Rate differentials have shifted in a dollar-positive direction this month, according to Goldman. The firm notes that while rate differentials have been a secondary driver of foreign exchange price action during the energy shock, real rate differentials continue to hold relevance. Recent data suggests approximately 20 basis points of spread widening in EU-US 2-year real rates should have created around 0.4% downside pressure on EUR/USD.