Technical Analysis

Goldman Sachs on the ‘bleak picture’ for Europe & more on why they cut EUR/USD forecast

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  • Goldman Sachs discusses EUR/USD outlook in light of revising down its near-term forecasts.
  • “The ECB has flagged that looming recession risks could lead to a smaller hiking cycle, and recent forward-looking data paint a bleak picture, particularly on the manufacturing side. But perhaps more critically over the longer run, if energy costs prove to be persistently higher and more volatile, it would require a weaker currency to compensate. As a result, if the current account stays around current levels, our estimate of Euro fair value would fall substantially,” GS notes.
  • “We therefore expect that recent EUR depreciation has further room to run, and have downgraded our 3-month forecast for EUR/USD from 0.97 to 0.94 (while maintaining our 6- and 12-month forecasts at 0.97 and 1.05), mostly due to the diverging cyclical and policy outlook between the US and Euro area,” GS adds.

ps. I did post a note from GS yesterday on their cut to their EUR/USD forecasts, this is adding a little more.

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