Goldman Mark Near Term EUR/USD Call Lower

Goldman Sachs have refreshed their global FX forecasts. The forecasts take on board their economists' "recent change in Fed call, which now anticipates U.S. rate hikes starting in July 2022 rather than Q323. As a result, we have reduced the degree of USD depreciation in our forecasts, especially vs. the EUR. We now forecast that EUR/USD will remain roughly range-bound over the coming year, reaching $1.16 in 3 months and $1.18 in 12 months (vs $1.25 previously). If U.S. inflation falls below 2% next year - e.g. because goods prices decline more than expected - the Fed could remain on hold for a longer period, reopening the possibility of EUR strength vs USD. Despite a stronger USD in general, we do expect appreciation vs USD for certain commodity exporters and select EM and G10 crosses."

• "Moreover, we continue to see structural weakness for the broad USD, due its high valuation, reduced U.S. asset market outperformance, and new threats to the greenback's international role from the opening of the Chinese bond market and other factors. As a result, we continue to forecast trend USD depreciation in 2023 and beyond. Aside from USD crosses, we expect to find opportunities in FX markets next year through differentiation in terms of trade exposure, central bank policy, and carry."