What the desk is arguing
The thesis conveys a more bullish outlook on the EUR/USD based on the macroeconomic backdrop where weakening US fundamentals are influencing capital flows towards the euro. The note from Goldman Sachs underscores the fact that capital shifts are increasingly favoring Eurozone assets, which could further elevate the euro's strength against the dollar.
Goldman Sachs' specific target revisions reinforce this view, with forecasts indicating EUR/USD values of 1.2100 by Jun26 and potentially 1.2500 by Dec26. This contrasts with the current spot at 1.1500, suggesting a significant upward potential. Notably, the expectation of persistent economic weakness in the US will likely catalyze a reallocation of funds toward the eurozone, aligning with Goldman’s insights.
Where it sits in our coverage
Our current consensus target for EUR/USD stands at 1.1700 for Mar26, with a variance range from 1.1300 to 1.2000. Notable forecasts from key firms include: - jpmorgan: Mar26 1.1800 - goldman: Mar26 1.1800 - deutschebank: Mar26 1.1800
The Goldman Sachs view is notably more aggressive than the consensus, especially regarding their final targets where they project a range of 1.2100 to 1.2500 compared to the median range of 1.1300 to 1.2000 suggested by others. This suggests an emerging consensus around a potential upward shift in EUR/USD.
How other firms see it
Several firms, such as morganstanley and mufg, also share a bullish perspective, with both targeting 1.2000 for Mar26. In contrast, firms like citi and bofa have lower expectations, predicting 1.1300 and 1.1700 respectively for the same period. This divergence illustrates varying perceptions of economic conditions influencing the EUR/USD trajectory.
Factors to watch include related movements in EUR/GBP and USD/JPY, as well as central bank signals emanating from the ECB and the FOMC which may reinforce or undermine current forecasts.