Goldman Sachs has changed its EUR/USD forecasts based on several factors, such as poor performance of European equities, reduced foreign interest in US investments, and signals of a US economic slowdown. While US stocks have remained stable in dollar terms, they have dropped by 8% for Euro traders, making European stocks more attractive. This shift in the US investment environment is driving global traders to move away from the USD and its related assets.

Goldman Sachs EUR/USD Forecast

Recent economic data shows that the US economy is slowing down, which supports the idea that the USD will weaken further. Goldman Sachs has updated its EUR/USD rates to 1.17 for 3 months, 1.20 for 6 months, and 1.25 for 12 months. Earlier targets were set at 1.12, 1.15, and 1.20 after the Liberation Day policy announcement. Goldman Sachs holds a negative view on the USD, influenced by macroeconomic trends and shifts in global capital investment. They expect the EUR/USD to rise, with a new target of 1.25 in 12 months. Ultimately, Goldman believes that dollar-linked trades will offer lower returns in the coming year. Their revised forecast shows where they think capital is moving. This isn’t just about currency strength; it reflects broader money movements and changes in investor behavior. Their analysis points to two main factors. First, American stocks have performed weaker when converted to euros. Although US equity indices seem stable in dollars, Euro traders have actually faced significant losses. This changes the outlook for global investments—other markets now look more appealing. Second, there’s solid data showing the US economy is slowing down. Low factory output, weaker job numbers, and declining consumer spending all suggest the same trend. If quick action is required, then the dollar is losing speed. As a result, demand for USD assets is noticeably decreasing. Fewer international investors are putting money into the US, which adds to the currency shift.

Currency Shift Dynamics

From our view, especially through options and forward markets, implied volatility has not yet fully adjusted to these changes. The new EUR/USD targets of 1.17, 1.20, and ultimately 1.25 within a year indicate ongoing opportunities for those managing medium- to long-term investments. We see potential pricing inefficiencies that others will likely start to address. Blankfein’s team isn’t just changing figures—they’re altering expectations of where capital should be placed. For investors with contracts involving dollar pairs, this trend is important to watch. Delayed data is sending signals slower than the actual prices already reflect. That’s where the advantage lies. In the short term, we are monitoring how these pricing adjustments are reflected in implied forward curves. The 3-month contracts have begun to show a higher EUR premium. However, in the 6- and 12-month periods, there’s still some room to adjust or hedge against ongoing dollar weakness—at relatively attractive premiums. This isn’t just about spot rates. Interest rate paths, which once supported the USD, are losing their strength. With heightened expectations for further tightening and the eurozone proving to be slightly more robust than anticipated, the differentials no longer favor the dollar as they did six months ago. Traders should pay attention to changing sentiments before major economic announcements and central bank discussions. We’ve seen that even minor disappointments from the US can lead to large price adjustments, as confidence in USD strength is waning. Be cautious of any positions based on outdated beliefs about dollar performance. It’s no longer effective to view the dollar as a guaranteed safe choice. Flexibility is now worth more than predictive accuracy. As Goldman’s updates indicate, the market is already shifting. Create your live VT Markets account and start trading now.

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