The dollar is likely to hit parity with the euro during 2017 driven by diverging paths for interest rates, according to Goldman Sachs' chief economist.
The Federal Reserve (Fed) is likely to hike interest rates three times in 2017, pushing it even further from the rate positioning stance of Europe during the course of the year, Jan Hatzius told CNBC at the Goldman Sachs Strategy Conference in London on Monday.
"The primary driver here is not valuation but really interest rate differentials. If we are right that the Fed moves the funds rate up more than what the markets currently pricing … that's generally a relatively good indicator to watch," he posited.
Goldman Sachs' base case estimate that the Fed will follow through with rate rises in June, September and December this year is more hawkish than current market consensus which is pricing in two hikes for 2017.
According to Hatzius, the U.S. investment bank even sees a 35 percent "subjective possibility" of a rate increase being announced by the Fed as early as this March, saying the cycle, "will be characterized as relatively gradual but there are definitely risks in both directions."