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Goldman Sachs note that "the Euro slipped over the past week against the Dollar and other G10 FX as idiosyncratic risks came back into focus. These included the resignation of members of the Italian government, this weekend's CDU leadership contest (won Saturday by Armin Laschet from North Rhine-Westphalia), and the specter of lengthier Covid lockdowns across the continent. Despite the setbacks, we continue to expect Euro appreciation - even if the Euro Area economy does not outperform the US - and do not favor EUR-funded EM FX trades for this reason. One reason to expect ongoing Euro appreciation is reserve recycling behavior: many EM central banks have intervened in currency markets in recent months to prevent excess appreciation, and they will often sell a portion of newly-acquired Dollars for other major currencies, including Euro, to keep the FX composition of their reserve portfolios unchanged. We continue to favor Dollar shorts vs AUD and CAD in G10 and against a variety of EM currencies, but will hold back on adding EUR back to Dollar short baskets until some of the domestic risks clear."