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11 Feb 2013
Forex Flash: EUR/USD slated to rise on bearish USD – Goldman Sachs
According to the Economics Research Team at Goldman Sachs, “Our long-term views on the EUR/USD are driven by our structural bearish stance on the USD. The weak balance of payments of the US vs. the stronger BBoP trend for the Euro area still implies a weak USD and a stronger EUR.”
Following the announcement of the ECB’s OMT program in September, there has been a strong rally in the EUR due to a perceived reduction in Euro area tail risk. “Despite this rally, many investors have substantially reduced EUR exposure during the crisis, including central banks and further normalization could push EUR/USD higher.” notes the team.
While downside risk remains in the Euro area due to policy implementation risk and growth underperformance linked to front-loaded fiscal tightening, in the longer run – and after more 'muddling through' – “we expect gradual progress with deeper integration in the Euro area, which should ultimately boost the EUR.” they add.
Following the announcement of the ECB’s OMT program in September, there has been a strong rally in the EUR due to a perceived reduction in Euro area tail risk. “Despite this rally, many investors have substantially reduced EUR exposure during the crisis, including central banks and further normalization could push EUR/USD higher.” notes the team.
While downside risk remains in the Euro area due to policy implementation risk and growth underperformance linked to front-loaded fiscal tightening, in the longer run – and after more 'muddling through' – “we expect gradual progress with deeper integration in the Euro area, which should ultimately boost the EUR.” they add.