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Goldman Sachs: We're making a major shift in our USD view, EUR/USD forecasts hiked - investingLive

04 Aug 2025, 07:00 UTC
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At a Glance

Goldman Sachs has significantly revised its USD outlook, now expecting a weaker dollar and higher EUR/USD forecasts. This shift aligns with our consensus view but implies a larger move than the median forecast, highlighting a growing divergence between spot and consensus.

Key Takeaways

  • 01Goldman Sachs now forecasts EUR/USD at 1.25 by end-2026, one of the most bullish calls among major banks.
  • 02The consensus end-2026 target is 1.22, with a wide range from 1.16 to 1.25, indicating significant uncertainty.
  • 03Goldman's shift aligns with our view that the dollar is overvalued, but the magnitude of its forecast is at the extreme, suggesting a high-conviction trade.

Full Analysis

What the desk is arguing

Goldman Sachs has made a major shift in its USD view, hiking EUR/USD forecasts across the board. The new projections see EUR/USD at 1.1800 by March 2026 and 1.2500 by December 2026, signaling a sustained dollar depreciation.

This revision is supported by Goldman's expectation of a more aggressive Fed easing cycle and a narrowing interest rate differential. The firm sees the EUR benefiting from a structural improvement in the euro area's fiscal stance and current account surplus.

Implicitly, Goldman is rejecting the view that the dollar will remain resilient due to geopolitical uncertainty or a 'higher-for-longer' Fed rate path. Instead, it argues that the market is underappreciating the pace of Fed cuts and the euro area's economic recovery.

Where it sits in our coverage

Our consensus for EUR/USD at end-2026 is 1.2200, with a range among firms of 1.1600 to 1.2500. Goldman's December 2026 target of 1.2500 sits at the very top of that range, well above the median. This makes Goldman one of the most bullish EUR/USD forecasters among the banks we track.

Specific firm December 2026 targets include: - Goldman Sachs: 1.2500 - Deutsche Bank: 1.2500 - MUFG: 1.2400 - ING: 1.2200 - BofA: 1.2200 - Barclays: 1.2100 - JPMorgan: 1.2000 - Morgan Stanley: 1.1600

Goldman's view aligns with the top end of our coverage, shared only by Deutsche Bank. This underscores a bifurcation: the most bullish firms see a significantly weaker dollar, while others are more cautious.

How other firms see it

JPMorgan is more conservative with a December 2026 target of 1.2000, well below Goldman's 1.2500. Morgan Stanley is notably bearish, forecasting 1.1600, arguing that US economic outperformance will persist.

Firms aligned with Goldman's bullish euro view include: - Deutsche Bank: December 2026 target of 1.2500, exactly matching Goldman - MUFG: December 2026 target of 1.2400, slightly below but still bullish

Firms with contrarian views: - Morgan Stanley: December 2026 target of 1.1600, significantly lower - Barclays: 1.2100, below consensus - JPMorgan: 1.2000, below consensus

Market Implications

Goldman's revision could reinforce bullish euro sentiment and prompt other banks to revise their forecasts higher. If realized, a weaker dollar would boost EUR-denominated assets and weigh on US equities. However, the wide dispersion of targets suggests that the market is still debating the path of US rates and euro area growth, implying potential volatility around key data releases.

From the original

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