Goldman Sachs maintains its EUR/USD forecast at 1.05 for the next 3 to 6 months. The outlook is influenced by potential political uncertainties and the resulting policy divergence, which could weaken the Euro.
Key Points:
Political Uncertainty Impact:
Euro Weakening: Political uncertainty, especially around elections, may erode progress in economic indicators, inviting further policy divergence.Soft Data Influence: Recovering Euro area activity momentum has been preventing EUR downside, but political uncertainties could alter this dynamic.
Policy Divergence:
Impact of Political Events: The post-election environment might lead to changes in policy, affecting the Euro’s strength.Next Week’s Flash PMIs: These indicators will only partially capture the impact of the election announcement, leaving room for further developments.
Market Dynamics:
“Low Flow Zone”: The period between now and the US election is expected to be characterized by low market activity, influenced by political uncertainties.Disruption Potential: The market might act as a forcing mechanism, leading to more “disruption” and affecting the Euro’s value.
Conclusion:
Goldman Sachs continues to forecast EUR/USD at 1.05 over the next 3 to 6 months, considering potential political uncertainties and the resulting policy divergence. The anticipation of a low activity period between now and the US election further supports this outlook.
This article was written by Adam Button at www.forexlive.com.
