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Feb 27 - 06:55 PM

Goldman Sachs: EUR/USD Outlook—Stuck in a Narrow Range

By eFXdata  —  Feb 27 - 03:00 PM

Synopsis:

Goldman Sachs provides an analysis on the EUR/USD currency pair, noting its recent stagnation within a narrow band between 1.05 and 1.10 since December 2022. Despite aligning closely with their forecast of 1.08, the bank suggests a continuation of this trend in the near term. The report emphasizes that significant policy divergence or cyclical convergence might be required to drive the EUR out of this trading range, highlighting potential risks on both sides of the market.

Key Insights:

  • Current Trading Range: The EUR/USD pair has been trading within a tight range of 1.05 to 1.10 for several months, reflecting a period of market stagnation and uncertainty.

  • Short-Term Outlook: Goldman Sachs anticipates that this pattern will persist in the near term, suggesting that significant economic or policy shifts are necessary to catalyze a breakout in either direction.

  • Policy Divergence and Cyclical Convergence: The analysis indicates that a more compelling case for a breakout in the EUR/USD rate would likely stem from either a notable divergence in monetary policy between the European Central Bank and the Federal Reserve or a convergence in the economic cycles of the Eurozone and the United States.

  • Risks in Both Directions: The report acknowledges the development of risks that could impact the EUR/USD pair from both sides, implying that market participants should be prepared for potential volatility and shifts in the currency dynamics.

Conclusion:

Goldman Sachs' assessment of the EUR/USD currency pair suggests a continuation of its current trading range in the near term, with significant movements expected to be driven by major policy changes or shifts in economic performance between the Eurozone and the United States. The firm advises caution and vigilance for investors, highlighting the presence of risks that could influence the currency pair in both directions. This analysis underscores the complex interplay of economic indicators, policy decisions, and market sentiment in shaping currency values.

Source:
Goldman Sachs Research/Market Commentary

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