01 July, AtoZForex.com, Limassol – In a special report this morning of Goldman Sachs EURUSD, it was argued by the bank that: “We continue to see mounting tensions over Greece as a catalyst for EUR/USD to go near parity, if contagion to other peripherals causes the ECB to accelerate QE … We continue to forecast EUR/USD at 0.95 in 12 months,” GS projects.
Current markets reaction to news of the Greek referendum puzzles Goldman. They have commented on the matter: “This week’s jump in the Euro on news of the Greek referendum made no sense to us. As always, there are competing ex post explanations for what happened, but we see two things at play.”
“First, the market treated developments in Greece as a negative global growth shock, with rates markets pricing out hikes in those places seen as closest to lift-off. That penalized the US and the UK most of all and pushed rate differentials in favor of the Euro. We fail to see how mounting tensions around Greece do anything other than reinforce US outperformance over the Euro zone, i.e., we see this price action as a fade,” GS clarifies.
“Second, after years of cliff-hangers, the market continues to expect a deal at the last minute, including in the aftermath of the referendum announcement. As a result, few are willing to put on Euro downside, even as the odds of a deflationary shock to the Euro zone are rising,” GS adds.
Goldman Sachs did not mention monetary policy divergent that U.S will create between Dollar and Euro by having Fed rising rates. Further adding unnecessary weight on Eurozone, next to Greece burden, hurting EUR and itself in a long run. GS is still convinced the first rise will happen in December.