FORTRADER 26/11: Goldman Sachs stated that they have significantly reduced their short position in the EUR/USD pair. The statement came at a time when the euro to US dollar exchange rate reached 1.05, which is the lowest level in 17 months.
1.05 in EUR/USD – an level that already factors in ECB and FRS actions
The bank believes that the current exchange rate fully reflects further expected actions of the ECB and FRS on monetary policy.
The actions of Goldman Sachs raised concerns that the ECB may abandon its monetary easing at the December meeting. Additionally, on the eve of the meeting, an ECB representative, Ardo Hansson, stated that he sees no reason for such actions at the December meeting.
However, closing part of the short positions in EUR/USD does not mean that Goldman Sachs is betting on a rise in the euro. Simply put, in the October forecast, the bank recommended holding the short position with a target of 1.05 until December. The target was achieved, and part of the positions were closed. Further forecasts suggest that the euro-dollar currency pair will fall to 0.95 in the first quarter of 2016 and to 0.80 by the end of 2017.
At the moment, it is expected to wait for the ECB’s decision in December. This is justified from the perspective that Draghi may limit verbal interventions and not take any measures at the end of the December meeting of the Board of Governors or only lower the deposit rate, while the market is already factoring in an expansion of QE.
On the other hand, there are certain doubts regarding the FRS, which also in December should change its current monetary policy course and begin the process of raising the key interest rate. According to calculations by the Atlanta Fed, economic growth in the US for the fourth quarter will be 1.8% or 2.1% for the entire year of 2015, which is below the 2.4% recorded in 2014.
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“excerpt”: “Goldman Sachs reduces short positions in EUR/USD. What prompted the major financial institution to change strategy?”,
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“short_description”: “Goldman Sachs closes short positions in EUR/USD. What triggered the major financial institution to change its strategy?”,
“faq_html”: “
FAQ
What does Goldman Sachs’ reduction of short positions in EUR/USD indicate?
It suggests that Goldman Sachs believes the current EUR/USD exchange rate already factors in potential actions by the ECB and FRS, leading them to reduce their short exposure.
Why is the 1.05 level significant for EUR/USD?
The 1.05 level represents the lowest exchange rate in 17 months and is considered a key level that already accounts for expected monetary policy actions by central banks.
What are the future forecasts for EUR/USD according to Goldman Sachs?
Goldman Sachs predicts that EUR/USD could fall to 0.95 in Q1 2016 and further to 0.80 by the end of 2017, depending on the decisions made by the ECB and FRS.
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