Although Goldman maintains an upward-sloping trajectory for euro, it has also lowered its six-month and 12-month forecasts to 1.45 and 1.50, respectively, from 1.50 and 1.55 because of heightened fiscal tensions in the eurozone and a substantial increase in speculative short euro positions reflecting the increased risk premium.
“We expect slower progress towards improved fiscal policy and coordination in the eurozone, and hence the risk premium may remain wide,” Goldman said in its most recent FX report. “At the same time, the dollar is still under much broader depreciation pressures. We therefore continue to expect EUR/$ to rise again, albeit from a slightly lower starting point.”
The downgrade brings Goldman Sachs’ forecasts, which were previously among the most bullish of all forecasters, according to Bloomberg data, towards the market consensus of 1.40. Forecasters that still maintain a more positive outlook for the euro are BNP Paribas and Barclays Capital, with forecasts of 1.50 and 1.49, respectively. At the other end of the spectrum, Morgan Stanley, UBS and Standard Bank are forecasting 1.30 in three months time.