Forex Flash: Euro to strengthen against the dollar – Goldman Sachs
FXstreet.com (Barcelona) - The analysts at Goldman Sachs'long term views are driven by the structurally bearish view they hold on the US dollar.
They believe that the weak balance of payments of the US against the stronger trend for the Euro area still implies a weak USD and a stronger EUR. In the near term however they see the signal from the relative Euro area BBoP strength attenuated by a range of factors.
Following the announcement of the ECB's OMT programme in September, there has been a strong rally in the Euro due to a perceived reduction in Euro area tail risk. The team notes that short positioning in EUR remains significant and a further unwind could push the pair higher.
However, they feel that ongoing implementation risk in the Euro area and growth under performance linked to front loaded fiscal tightening are likely to be a drag on the EUR, while ongoing anaemic global macro conditions may lead to less appetite for risky assets and, in turn, USD strength. In the longer run (and after more fudging) they expect gradual progress with deeper integration in the Euro area, which should ultimately boost the EUR.
They believe that the weak balance of payments of the US against the stronger trend for the Euro area still implies a weak USD and a stronger EUR. In the near term however they see the signal from the relative Euro area BBoP strength attenuated by a range of factors.
Following the announcement of the ECB's OMT programme in September, there has been a strong rally in the Euro due to a perceived reduction in Euro area tail risk. The team notes that short positioning in EUR remains significant and a further unwind could push the pair higher.
However, they feel that ongoing implementation risk in the Euro area and growth under performance linked to front loaded fiscal tightening are likely to be a drag on the EUR, while ongoing anaemic global macro conditions may lead to less appetite for risky assets and, in turn, USD strength. In the longer run (and after more fudging) they expect gradual progress with deeper integration in the Euro area, which should ultimately boost the EUR.
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