Synopsis:

Goldman Sachs remains bearish on EUR/USD, arguing that its current equilibrium is fragile due to potential trade tariffs on European goods and ongoing growth risks in the Eurozone. They see markets underpricing tariff risks, which could ultimately drive the currency lower.

Key Points:

1️⃣ Tariff Risks Remain ⚠️

• Goldman expects US tariffs on some European goods, which could weigh on Eurozone growth.
• Markets are not fully pricing in this risk, leaving room for downside.

2️⃣ Unstable Equilibrium ⚖️

• Recent EUR/USD gains may be overstated if trade tensions escalate.
• Tariffs and trade uncertainty could push EUR/USD lower in the coming months.

3️⃣ Policy Response Could Provide a Temporary Lift 📈

• EU policy adjustments might offer some short-term support for EUR.
• However, Goldman sees this as insufficient to prevent longer-term depreciation.

Conclusion:

Goldman Sachs maintains its bearish EUR/USD stance, warning that markets are not fully pricing tariff risks. If trade uncertainty escalates, EUR/USD is likely to move lower in line with their forecast for a more substantial depreciation.