The US dollar strengthened on Monday as crude and gas prices climbed and equity markets retreated following developments over the weekend, Goldman Sachs said. The bank described the recent price action as driven more by shifts in relative terms of trade than by broad risk appetite.
Within the G10 currency group, the Norwegian krone and the Canadian dollar outperformed, while the euro and the Japanese yen lagged. In emerging markets, the South African rand and the Indian rupee also showed notable movement, reflecting the cross-section of exposure to changing energy prices.
Among energy importers, the Hungarian forint drew particular attention in the wake of a domestic political shift. The opposition captured the parliamentary elections and the Tisza party secured a two-thirds super-majority in parliament. Goldman said that this commanding majority gives the party the capacity to pass legislation that aligns with the EU's super milestones needed to unlock EU funds and could clear the way for eventual euro adoption.
Goldman Sachs expects a clearer trajectory for economic policy stemming from the election outcome to support continued appreciation of the forint. The firm cited a likely reduction in the country's risk premium and improved growth and external balance outcomes as the key channels through which the currency could strengthen.
Despite the forint's prospects, Goldman highlighted a broader vulnerability for energy-importing economies. For Hungary specifically, oil and natural gas imports constitute the bulk of the country's energy trade balance. Using current market levels - Brent at $103 per barrel and European natural gas near EUR48 per megawatt-hour - Goldman estimates the net energy balance would worsen by roughly 1.3 percentage points relative to 2025.
Goldman notes, however, that incoming EU disbursements would more than offset that swing. The Recovery and Resilience Facility includes grants equivalent to 3% of 2025 GDP and loans amounting to 1.8% of GDP, while the 2021-2027 EU budget funds should translate to around 2.5% of GDP per year if they are regularly disbursed.
The report also recalled market dynamics from the 2022 shock, observing that FX markets took longer to fully price in the economic fallout than they did to react to shifts in broader risk sentiment and volatility. In light of current conditions, Goldman expressed a negative view on the Philippine peso, the Thai baht and the Indian rupee, citing their exposure to energy imports alongside weak external balance and growth prospects.
Summary
Goldman Sachs says the dollar strengthened on rising energy prices and equity weakness, reflecting terms-of-trade effects. Norway and Canada’s currencies outperformed while the euro and yen underperformed. Hungary’s election outcome could underpin forint gains through improved policy clarity and EU fund inflows, while several energy-importing EM currencies remain vulnerable.
Key points- Dollar appreciation on Monday tied to higher oil and gas prices and equities selling off - impacts global FX markets.
- Norwegian krone and Canadian dollar outperformed in G10; euro and yen underperformed; South African rand and Indian rupee moved among EMs.
- Hungary’s opposition victory and two-thirds parliamentary majority could unlock EU funds, supporting forint appreciation despite higher energy costs.
- Energy - rising input costs affect trade balances and currency pressures for importers and exporters.
- Financial markets - FX and equity volatility respond to commodity price and political developments.
- Public finance - EU fund disbursements influence external balances and fiscal positions in recipient countries.
- High energy prices may widen external deficits for energy importers, pressuring currencies and sovereign balances - relevant to emerging market economies and countries dependent on energy imports.
- FX markets may lag in fully pricing the economic impact of shocks, creating potential for delayed currency adjustments and volatility - relevant to FX and fixed-income markets.
- Political developments and the timing of EU fund disbursements introduce uncertainty about the magnitude and timing of external balance improvements - particularly material for Hungary.
Goldman Sachs’s assessment emphasizes the interaction between commodity prices, political outcomes and external financing in shaping currency performance. The firm’s outlook highlights winners among energy exporters and constrained prospects for some energy-importing currencies unless offsetting financing arrives.