Goldman Sachs has updated its forecasts for the EUR/USD currency pair and is advocating for a long position in EUR/SEK as part of an inflation hedge strategy.
Key Takeaways:
Revised EUR/USD Forecasts: Goldman Sachs is adjusting its projections for EUR/USD to 1.07, 1.10, and 1.12 in 3, 6, and 12 months respectively, up from its previous estimates of 1.05, 1.05, and 1.10. The updated forecasts maintain a year-end expectation of 1.10 but indicate less downside in the short term and a more extended recovery of the Euro relative to the US Dollar beyond the peak.
Long EUR/SEK as Inflation Hedge: Goldman Sachs reiterates its recommendation for investors to take a long position in EUR/SEK with a target of 12.00. The bank believes that Sweden faces a more challenging trade-off due to its economy's higher sensitivity to policy rates and particular exposure to the manufacturing sector. This position is seen as a way for investors to protect against the possibility of persistently high inflation and elevated interest rates.
Leveraging Swiss Franc: Additionally, Goldman Sachs advises investors to explore ways to utilize the Swiss Franc’s traditional inflation hedging properties.
In Conclusion:
Goldman Sachs has revised its EUR/USD forecasts to reflect a milder downside in the near term and a more prolonged recovery for the Euro. Moreover, the bank recommends a long position in EUR/SEK to hedge against potential inflationary pressures and higher interest rates. It also suggests that investors consider capitalizing on the Swiss Franc's inherent characteristics as an inflation hedge.
For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.
