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Goldman Sachs Close Short EUR/GBP, But Look for Opportunities to Re-engage

FOREX
  • Goldman Sachs write that they’ve closed their short EUR/GBP trade recommendation (for 1.5% profit), but looks for opportunities to reengage. They write that the BoE faces a less challenging trade-off now that energy prices have moved sharply lower, naturally transitioning GBP from a negative outlier to a positive one. This leaves BoE with relatively more work to do under their economists’ forecasts, meaning GBP should benefit vs USD and EUR.
  • On the USD, they write that the headline story is relatively straightforward, as the US economy continues to surprise to the upside, while Europe and China have been weaker. That continues to be positive for USD near term, bit USD depreciation can come back into view. At current pricing, “sticking with skipping” in the midst of a buoyant risk backdrop would present some challenge to the USD, but they suspect that downside will continue to be shallow and limited by US macro performance.
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