The euro has steadied above 1.1400 against the dollar, yet the greenback keeps firm support as traders scale back bets on a long stretch of dollar weakness. Goldman Sachs cut its 12-month EUR/USD forecast to 1.12, and JP Morgan still sees room for a slide toward 1.10.
The dollar continues to hold firm support as investors pare back expectations for a prolonged period of dollar weakness, even after the euro stabilised above the 1.1400 level. What keeps the currency underpinned is the resilience of the US economy and the question of whether the Federal Reserve will need to keep interest rates higher for longer.
Banks trim their euro targets
The dollar bears are retreating. Goldman Sachs lowered its 12-month EUR/USD forecast to 1.12 from 1.20, a notable step back from its earlier call. According to Goldman: “we are unlikely to return to broad-based sustained dollar depreciation for some time.”
JP Morgan takes a similar line. The bank continues to see potential for EUR/USD to retreat to 1.10 over the coming months. The pair itself found support below 1.14 during the week and edged higher, but could not make significant headway.
Geopolitics and rates set the tone
Beyond the forecasts, the dollar drew limited support from a spike in oil prices as the US and Iran traded military strikes over control of the Strait of Hormuz. Even so, markets stayed focused on the US rate path rather than the headlines.
Goldman flagged that markets could revise their Fed rate forecasts even higher, which would potentially trigger strong dollar buying.
Source: CurrencyNews.co.uk
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