Having flip-flopped from forecasting EUR strength for the next 12 months in April (target 1.40), Goldman has rapidly ratcheted down its expectations for the flailing currency to 1.30 previously and now forecasts EURUSD at 1.20 in 12 months. As Goldman notes, “because we believe the dynamics of the Euro have fundamentally changed and because we expect cyclical outperformance of the US, a prolonged period of Euro undervaluation can be expected and this is reflected in our longer-term forecasts.” Trade accordingly…
Via Goldman Sachs,
1. We are revising down our EUR/$ forecast to 1.29, 1.25 and 1.20 in 3, 6 and 12 months (from 1.35, 1.34 and 1.30 previously). We are also revising our longer-term forecasts lower, bringing the end-2015 number down to 1.15 (from 1.27), that for end-2016 to 1.05 (from 1.23) and that for end-2017 to 1.00 (from 1.20). We switched from forecasting Euro strength to weakness in April, when we revised our 12-month forecast from 1.40 to 1.30, and the decline since then has been faster than we anticipated. Our latest forecast change aims to signal that the current move lower in EUR/$ has staying power and, in our view, is the beginning of a trend.
This post was published at Zero Hedge on 08/29/2014.