From MoneyBeat, Dec. 7:
Goldman’s chief FX strategist Robin Brooks wrote in the note that the bank now sees the euro at $1.07, $1.05 and $1 in three, six and 12 months, respectively. Previous forecasts for those time horizons had been $1.02, $1 and $0.95. The euro is currently hovering just over $1.08. At the same time, Goldman has also tweaked its end-2017 forecast to $0.90 from $0.80.Recently:
“Counter to our expectations, the ECB underwhelmed markets,” Brooks wrote.
“Of course, the ECB did provide additional stimulus [...] But in the end, what mattered last week was whether the ECB sent a message [...] that signaled a sense of urgency over the need to confront low inflation,” he added. “It did not.”
At last Thursday’s meeting, ECB President Mario Draghi announced a cut in the deposit rate–to minus 0.3% from minus 0.2%–and a six-month extension of the bank’s bond-buying program. Investors, however, had broadly predicted a deeper cut and a greater extension.
Monetary stimulus has this year sent the euro sliding against the dollar and a beefed up program may have accentuated that move, analysts said.
At the same time, the US Federal Reserve is broadly expected to raise interest rates next week for the first time since 2006. Higher interest rates, many say, could bolster dollar strength moving the euro closer to dollar parity.
But after Thursday’s ECB decision, the euro leaped higher against the dollar.
“There is no doubt in our minds that Euro down will again become a theme over time,” Brooks wrote. “But regrettably that time is not now....MORE
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We last visited Goldman's currency guy at EUR/USD 1.10146. on Oct. 30.
Ten days later we're at 1.0772. At this rate the euro is worthless by the end of next year.
DXY 98.95 down .29. Swedish Krona currently 8.6671 to the buck....
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