Goldman Sachs lowered its six- and 12-month EUR/USD forecasts to 1.12 from 1.18 and 1.20 respectively. The euro traded near 1.1415 after losing more than 2 percent in June. The bank cited a divided dollar environment and resilient US growth as reasons for the revision.
Goldman Sachs lowered its six- and 12-month EUR/USD forecasts to 1.12 from 1.18 and 1.20 respectively. The euro traded near 1.1415 after losing more than 2 percent in June. The bank cited a divided dollar environment and resilient US growth as reasons for the revision.
Goldman Sachs cut its six- and 12-month EUR/USD forecasts to 1.12, down from 1.18 and 1.20, as the dollar strengthens.
"The forecast revisions reflect an ongoing divided dollar environment," Goldman Sachs strategists said in a research note dated July 11. The bank does not expect uniform dollar gains across the foreign exchange market.
The bank expects US interest rates to remain at 3.50 percent to 3.75 percent for the rest of 2026, with gross domestic product growing 2.0 percent this year and core PCE inflation ending the year at 3.0 percent. These conditions reduce the case for rapid Federal Reserve easing, keeping US yields relatively attractive against lower-yielding currencies such as the euro.
EUR/USD traded around 1.1415 after losing more than 2 percent in June and struggling to build a sustained recovery in July. The revised targets imply further downside of about 1.9 percent from current levels, testing the euro's ability to hold above the 1.12 threshold.
Goldman's previous forecasts stood at 1.18 for six months and 1.20 for 12 months. The bank now sees both horizons converging at 1.12, suggesting the dollar's advantage over the euro will persist through mid-2027.
The divided dollar environment means the greenback is likely to strengthen further against lower-yielding currencies such as the euro while losing ground against selected higher-carry currencies, Goldman said. The bank's outlook contrasts with expectations from some market participants for a weaker dollar later this year as the Fed eventually pivots to rate cuts.
The euro's 2 percent decline in June marked its worst monthly performance since January, pressured by political uncertainty in France and a widening interest rate differential between the US and the euro zone. The European Central Bank cut its deposit rate by 25 basis points to 3.25 percent in June, while the Fed has held its benchmark rate at 3.50 percent to 3.75 percent since May. That 25-to-50 basis point gap has supported dollar demand against the single currency.
The US Dollar Index, which measures the greenback against a basket of six major currencies, has gained about 3 percent since late May, according to Bloomberg data. A stronger dollar typically weighs on risk assets including commodities and emerging-market currencies.
The forecast revision signals that Goldman expects the dollar's yield advantage to persist as the Fed holds rates steady through year-end. Investors will watch the July 30-31 FOMC meeting for updated rate projections that could reinforce or challenge this outlook.
This article is for informational purposes only and does not constitute investment advice.
