6-Month Euro To Dollar Rate Forecast Cut To 1.05 At Goldman Sachs - Exchange Rates UK

What the desk is arguing

Goldman Sachs has cut its 6-month EUR/USD forecast to 1.05, signaling a deepening conviction that the euro will weaken against the dollar in the near term. The revision reflects expectations of continued Federal Reserve hawkishness relative to the European Central Bank, as well as structural headwinds from energy prices and fiscal drag in the Eurozone. The desk is implicitly rejecting the view that the ECB can close the policy gap quickly enough to prevent further downside.

Supporting this thesis, Goldman likely points to the resilience of the US economy and the stickiness of core inflation, which keep the Fed on a tightening bias. In contrast, Eurozone growth indicators have softened, and the ECB faces a more challenging trade-off between inflation and recession risks. The bank's new target also implies limited scope for a near-term euro recovery even if global risk sentiment improves.

The counterfactual the desk is rejecting is the scenario where a rapid decline in US inflation allows the Fed to pivot earlier than expected, or where Eurozone fiscal stimulus and a potential energy price cap provide a lift to the euro. Goldman's forecast suggests these factors are unlikely to materialize in the next six months.