Goldman makes bold prediction on euro

EURUSD at par?

Goldman Sachs Group Inc. reduced its forecasts for the euro, saying the recent slump against the dollar is the beginning of a long-term trend that will result in parity by the end of 2017.

The three-month estimate was cut to $1.29 from $1.35 and the six-month forecast to $1.25 from $1.34, Robin Brooks, the New York-based chief currency strategist, wrote in a research note today. That’s one of the most bearish views among banks surveyed by Bloomberg, with the median forecast of $1.31 by the end of the year and $1.30 by the end of the first quarter.

Since reaching $1.3993 on May 8, the euro has slumped 4.9%(CME:ECU4) on speculation the European Central Bank may ease policies to boost stagnant economic growth while the U.S. moves toward raising interest rates. That has trimmed the 16% appreciation up to that point from July 2012, when ECB President Mario Draghi bolstered the currency saying he’ll do “whatever it takes” to save it.

Goldman Sachs was one of the few banks that went against consensus and correctly predicted the euro’s ascent against the dollar and forecast at the end of 2013 that it’ll rise to $1.40 in six months.

Brooks revised down his one-year forecast to $1.20 from $1.30. The euro was little changed at $1.3186 at 9:14 a.m. in New York.

 

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