Goldman Sachs: Removing From G10 Dollar-Short Basket

Goldman Sachs note that "over the past week, both France and Germany announced major new public health restrictions and the ECB effectively pre-announced that it will ease policy further in December. The developments complicate the outlook for EUR/USD. On the one hand, a "blue wave" scenario in the US election and vaccine confirmation (expected in November) would likely boost all cyclical assets, including the Euro. On the other hand, near-term Euro Area GDP growth could badly underperform other regions, and we would expect markets to partly price in a deposit rate cut, even if the Governing Council ultimately "recalibrates" other instruments. We are therefore removing EUR/USD from our recommended G10 U.S. dollar short basket. Although EUR may edge higher on pro-cyclical news, domestic weakness suggests it will underperform other crosses."