Growth and energy divergence intensify: USD steadies, NOK benefits, GBP, TRY, and energy-importing Asian currencies come under pressure

Overview

This report is Goldman Sachs' global FX strategy update, discussing USD, GBP, EM FX, NJA FX, AUD, NOK, and TRY. The core backdrop is constrained energy flows, elevated oil prices, AI strength, growth divergence between the United States and other regions, and the repricing of FX markets by rates and risk sentiment. The report argues that FX is no longer just a rotation within relative-value trades; the divergence between the dollar, energy-exporting currencies, and energy-importing currencies is becoming more persistent.

Core views

The report's core views are as follows: first, the energy shock and improved U.S. activity data have restored the dollar's relative advantage, so dollar performance will be more differentiated than before but generally better supported; second, GBP risk premium may rise temporarily, and EUR/GBP, GBP/AUD, and GBP/USD can be used to express downside risk in sterling; third, EM FX remains sensitive to rapid increases in long-end U.S. Treasury yields, with MXN relatively more resilient and CLP and THB suitable as funding currencies within carry baskets; fourth, Asian central banks are stepping up rate defense, but PHP, INR, IDR, and THB may still underperform because of negative terms-of-trade shocks; fifth, NOK benefits from its energy exposure and fiscal mechanism, making it one of the more attractive energy beneficiaries in the report; sixth, TRY faces overlapping macro, reserve, and political risks, and the USD/TRY forecast has been raised.

Analysis framework

The report combines macro growth data, changes in terms of trade, energy prices, long-end U.S. real yields, stocks and copper prices, along with the GSBEER valuation model, proxy indicators for currency risk premium, and central bank policy-path judgments, to form directional views on major currencies and cross rates.

Methodology notes

• FX valuation modelGSBEER

  Use a cyclical valuation model to explain the gap between EUR/GBP and NOK's realized performance and model-implied performance.

  The report uses GSBEER to identify the rise and pullback in the pound's risk premium and to judge that NOK's recent strength is broadly justified by energy prices and spread changes.

• Macro-driven frameworkTerms-of-trade shock

  Energy prices and constrained energy flows change the relative income, growth, and FX performance of different economies.

  The United States and Norway, among other relative beneficiaries, receive currency support, while Asian currencies with higher energy import dependence and GBP face greater pressure.

• Risk factor regressionEM FX sensitivity model

  Use S&P, US 10-year real yields, oil prices, and copper prices to explain weekly return sensitivity of emerging-market currencies to the dollar.

  The report notes that EM FX generally depreciated between May 14 and May 19, but most currencies still outperformed their model predictions to some extent; ZAR, COP, PLN, and HUF have historically high sensitivity to US 10-year real yields.

• Reserve and policy assessmentTRY reserve buffer analysis

  Assess the impact of Turkey's reserve buffer, managed depreciation path, political risk, and deteriorating trade balance on TRY management.

  The report believes TCMB reserves remain sufficient to absorb temporary energy-price shocks, but political uncertainty, local dollarization, and worsening core trade balance will increase reserve pressure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• USD

  Benefits from improved relative U.S. growth, AI strength, and constrained energy flows

  Strengths

  U.S. activity data are improving relative to peers, elevated energy prices are more favorable to the U.S. relative-performance backdrop, and upward pressure on the dollar is broadening beyond relative-value trades into the wider market.

  Weaknesses

  If risk relief appears, concerns over the technology sector re-emerge, or the energy shock eases, the dollar may pull back temporarily.

  Comparison

  Compared with Europe and some energy-importing economies, the dollar has a better growth and terms-of-trade mix.

  Risks

  Restoration of energy flows, a clear improvement in risk appetite, or renewed weakening in U.S. data.

• GBP

  Suppressed by fiscal and political risk premium, structural overvaluation, and the energy shock

  Strengths

  Sterling may rebound temporarily when the risk premium eases.

  Weaknesses

  Structural overvaluation, high BoE rate-hike pricing, borrowing costs, and energy pressure intensify fiscal-policy uncertainty.

  Comparison

  The report believes GBP/AUD and GBP/USD are better than EUR/GBP for expressing medium-term downside in sterling because they also capture divergence in energy terms of trade.

  Risks

  An easing in UK politics, stronger commitment to fiscal rules, or lower energy pressure.

• EM FX

  Driven jointly by long-end U.S. yields, risk sentiment, equities, and copper prices

  Strengths

  If Treasury yields rise alongside a cyclical rotation, EM FX can absorb rate pressure more effectively; MXN is more resilient because of its exposure to the U.S. cycle and its carry characteristics.

  Weaknesses

  EM FX tends to come under pressure when the US 10-year yield rises rapidly and hits risk sentiment.

  Comparison

  ZAR, COP, PLN, and HUF have historically high sensitivity to US real 10-year yields; CLP and THB are better suited as funding legs in carry baskets.

  Risks

  A rapid rise in U.S. real rates, a global equity selloff, weaker copper prices, or deteriorating risk sentiment.

• NJA FX

  Asian central banks are strengthening rate defenses, but energy-import shocks still dominate the performance of some currencies

  Strengths

  Rate hikes by some central banks help ease FX and inflation pressure, while CNY strength and technology exports support some regions.

  Weaknesses

  Currencies with high energy exposure such as PHP, INR, IDR, and THB still face pressure from worsening terms of trade.

  Comparison

  Malaysia and Thailand are expected to keep rates unchanged, but the bias has turned more hawkish; KRW is dragged down by equity outflows and remains weak even as the trade balance improves.

  Risks

  Oil prices remaining elevated, no normalization path for energy flows through the Strait of Hormuz, and continued increases in U.S. rates.

• AUD

  Near-term pressure from weaker domestic data and delayed RBA hikes, but still relatively resilient in the medium term

  Strengths

  Carry remains attractive, the currency benefits from China's export-led growth momentum, and it is supported when risk sentiment remains resilient.

  Weaknesses

  Employment, inflation, and consumer sentiment are weak; AUD/NZD positioning is crowded; and if the market's pricing conflict resolves, AUD/NZD may continue to drift lower.

  Comparison

  The report sees AUD as likely to outperform more broadly, especially against USD, but AUD/NZD momentum has slowed in the short term.

  Risks

  A more dovish RBA, continued downside data surprises in Australia, and the combination of lower oil prices and higher equity markets weighing on AUD/NZD.

• NOK

  Benefits from energy-export exposure, high oil prices, and Norway's fiscal mechanism

  Strengths

  NOK/SEK, after adjusting for volatility during the energy shock, has performed close to or better than a long July Brent trade; NOK is supported by oil prices and the interest-rate differential.

  Weaknesses

  NOK is still linked to European cyclical conditions, which may limit further outperformance versus some other commodity exporters.

  Comparison

  Relative to SEK and EUR, NOK looks more like an energy haven currency; the report lowers EUR/NOK and raises the NOK/SEK path to reflect NOK strength.

  Risks

  A pullback in oil prices, a clear deterioration in the European cycle, or easing of the energy shock.

• TRY

  Under a managed depreciation path, macro, reserve, and political risks are rising

  Strengths

  TCMB's reserve buffer is still considered sufficient to absorb temporary energy-price shocks and related outflows, provided local dollarization remains limited.

  Weaknesses

  TRY depreciation has accelerated since May to around -1.5% to -1.6% per month, reserves are still about US$38bn below pre-war levels, and political uncertainty plus deterioration in the core trade balance are increasing pressure.

  Comparison

  Compared with other high-carry currencies, TRY returns are more constrained by managed depreciation, reserve depletion, and political shocks.

  Risks

  Rising local dollarization, outflows triggered by political volatility, valuation volatility in gold reserves, and broad dollar strength.

Key data

• Report date2026-05-22The cover shows Economics Research 22 May 2026 5:57 PM BST.
• USD core judgmentThe dollar receives firmer supportThe report argues that every additional day constrained commodity flows persist is incremental positive for the dollar, all else equal.
• US 10-year yield speed thresholdApproximately 20-30bp/monthThe report says that if the US 10-year yield rises faster than this range, EM FX will struggle to avoid pressure even when cyclical equities are performing reasonably well.
• Philippines policy pathBSP raised rates by 25bp in April and is expected to deliver a temporary hike and then another 75bp of hikes to a terminal rate of 5.50%Used to respond to inflation and oil-price shocks.
• Indonesia policy actionBI unexpectedly raised rates by 50bp to 5.25%The aim is to defend IDR stability, which is under pressure from U.S. rates.
• Korea, India, Taiwan policy expectationsTwo hikes from BoK, two hikes from RBI, and two 12.5bp hikes from CBCBoK is expected in Q3 and Q4, RBI in Q4 for both hikes, and CBC in Q2 and Q4.
• AUD policy changeThe expectation for the RBA's final 25bp hike was pushed back from June to AugustThe reason includes weaker Australian employment, inflation, and consumer sentiment data.
• EUR/NOK forecast10.60, 10.60, 10.50Corresponds to the 3-, 6-, and 12-month forecasts.
• NOK/SEK forecast1.04, 1.02, 1.00Corresponds to the 3-, 6-, and 12-month forecasts.
• TRY reserve statusReserve assets remain US$38bn below pre-war levelsReserves have stabilized recently and even increased somewhat, but they remain clearly below pre-war levels.
• USD/TRY forecast48, 50, 54Corresponds to the 3-, 6-, and 12-month forecasts; previously 46, 48, 52.

Impact & implications

The investment implication is that global FX portfolios should place more emphasis on energy terms of trade, relative U.S. growth, and the speed of long-end yields, rather than simply betting on a single dollar direction. On a relative basis, USD and NOK still have fundamental support; GBP, TRY, and some energy-importing Asian currencies face higher downside or volatility risk; and EM carry allocations need structures such as long MXN and funding in CLP and THB to improve resilience to shocks in U.S. yields and risk sentiment.

Risks

• If constrained energy flows ease quickly, the energy-shock support for USD and NOK may weaken.
• If U.S. long-end real yields continue to rise rapidly, EM FX and risk assets may face further pressure.
• Political and fiscal uncertainty in the United Kingdom could push sterling's risk premium higher again.
• If oil prices remain elevated in Asian energy-importing economies, inflation, external balances, and currency pressure may continue to worsen.
• Political uncertainty in Turkey, local dollarization, and deteriorating core trade balance may increase pressure on TRY and reserve management.
• The report text contains OCR noise and some missing charts; certain figures should be taken from the original report and the dynamic tables.

What to watch

• Whether energy flows and disruptions related to the Strait of Hormuz ease.
• Whether high-frequency activity data in the United States, Europe, China, and other regions continue to diverge.
• Whether US 10-year real yields and their monthly pace of increase exceed about 20-30bp.
• Whether the actual performance gap between EUR/GBP and the GSBEER model widens again.
• Whether Asian central banks such as BSP, BI, BoK, RBI, and CBC hike rates as expected.
• Whether NOK's sensitivity to oil prices and European cyclical data changes.
• The impact of TCMB reserves, local dollarization in Turkey, and political events on the USD/TRY path.