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12 Jul 2013
Flash: EUR/USD could appreciate towards 1.4000 over year – Goldman Sachs
FXstreet.com (New York) - According to the Economics Research Team at Goldman Sachs, “The USD has benefitted from temporary support on the back of expectations of tighter Fed policy in the form of a tapering of asset purchases.”
At the margin, these expectations have probably shifted a bit too much with regards to the timing of the first rate hike. This creates some near-term Dollar downside risks. Moreover, the simple stabilization of current Fed policy expectations should be enough to reveal the underlying Dollar downside pressures, in particular vis-à-vis the Euro.
However, given that not all currencies can depreciate at the same time in the global FX market, at least one will have to strengthen. This makes it even more likely that European currencies will continue to outperform by default, despite additional ECB ‘forward guidance’. “We continue to expect a gradual recovery in EUR/USD towards 1.4000 over a 12-month horizon.” the team adds.
At the margin, these expectations have probably shifted a bit too much with regards to the timing of the first rate hike. This creates some near-term Dollar downside risks. Moreover, the simple stabilization of current Fed policy expectations should be enough to reveal the underlying Dollar downside pressures, in particular vis-à-vis the Euro.
However, given that not all currencies can depreciate at the same time in the global FX market, at least one will have to strengthen. This makes it even more likely that European currencies will continue to outperform by default, despite additional ECB ‘forward guidance’. “We continue to expect a gradual recovery in EUR/USD towards 1.4000 over a 12-month horizon.” the team adds.