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Goldman Sachs: Lagarde Looking Through Currency Appreciation

EURO

Goldman Sachs note that "as widely expected the ECB expressed limited concern about recent Euro appreciation: President Lagarde noted that a stronger currency would affect the inflation outlook, but did not otherwise try to talk down the Euro or indicate that rate cuts were forthcoming. With the ECB out of the way, we think the Euro is well-placed to participate in the broad Dollar weakness we anticipate. The single currency remains undervalued - we put longer-run "fair" at about 1.30 for EUR/USD - and under-owned by global investors. Moreover, Europe's open economy and more cyclically-oriented listed firms suggest domestic markets should benefit from a broad global recovery, encouraging portfolio inflows. Over the next two months we expect the Euro to follow developments in the broad Dollar. Certain events could be particularly impactful; for example, under a Biden election win scenario and with approval of a vaccine before year-end, the Euro could reach our 1.25 12m target much sooner than we currently forecast."

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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