Goldman Sachs certainly isn’t.
The bank now sees EUR/$ at 1.55 in 12 months time, a marked change from its previous guess estimate of 1.38. Writes the bank’s Thomas Stolper:
We are revising the majority of our FX forecasts to reflect broad Dollar depreciation. We have been emphasising for some time that structural US imbalances are the main reason for USD weakness and this remains our key theme. In the near term, a number of factors could still provide a boost for the Dollar, but these no longer form the base case for our 3-month forecasts. Instead, we expect the USD TWI to decline gradually from current levels, by about 4.7%, over the next 12 months and to get quite close to historical lows
Goldman says the euro upgrade reflects the deterioration in the US macro outlook, which is apparently best illustrated by this graphic:
Mixed with these reasons:
The combination of weaker growth, more QE, FX policy pressure on Asia for more currency appreciation and widening external imbalances all point in the same direction: broad USD weakness. And this is likely to remain the dominant theme.
Which is not good news for the eurozone and its exporters:
And today’s meeting at the European Central Bank is unlikely to bring any respite, says Ankita Dudani of RBS:
Over the past month, the ECB has been at odds with other major central banks, which are fretting over extending stimulus. Despite no sign of improvement in the periphery, the ECB has turned decisively more hawkish with a shift back to exit strategy. This will not change today.
Current variables suggest that EUR/USD is about 4 cents rich to fair value, but we await signs of turnaround in Eurozone growth, sovereign debt problems coming back to the fore and the end of the US bond rally before establishing EUR/USD shorts. Buy EUR/USD dips.
Related link:
The euro desert – FT Alphaville