Goldman Sachs evaluates the question of whether the Euro is prepared to hit the 1.10 year-end target against the US Dollar, a goal that was established earlier in January. The bank suggests that the Euro is not yet ready to make that move. Even though the US Dollar strength is stretched against the majors, it is still likely to extend further in the near-term.

Key Points:

• US Dollar Resilience: The US Dollar's strength continues, particularly when contrasted with other major currencies. This trend is driven by forward policy outlooks from both the Federal Reserve and the European Central Bank (ECB).

• Fed vs. ECB Policy Debate: While Federal Reserve officials appear to agree on another pause in rate hikes, there's active debate within the ECB about a potential hike. This divergence in policy stance is contributing to USD resilience.

• Forward Outlook: FX markets are more responsive to forward policy outlooks than to current decisions. The Federal Reserve is actively debating whether their policy is restrictive enough to bring inflation back to target levels, given positive consumer outlooks and survey measures. Meanwhile, even hawkish members of the ECB are cautious, interpreting a potential hike as a chance to "sneak one more in" before data turn negative.

• Year-End Target: Goldman Sachs remains committed to their 1.10 year-end target for EUR/USD, but they caution that they may need to wait longer for the conditions to become clear for that target to be achievable.

Conclusion:

Goldman Sachs maintains a cautious stance on the near-term outlook for EUR/USD, attributing this primarily to diverging monetary policy outlooks between the Federal Reserve and the ECB. While they still uphold their 1.10 year-end target for the Euro against the US Dollar, they believe that achieving this target may take longer than initially anticipated.