EUR/USD fell as low as 1.3512 today but has climbed to 1.3537 after the soft US retail sales report.
Stolper has been ousted and Goldman Sachs has been making some better calls on EUR/USD. They argue for more downside from here with a 12 month target of 1.30. They say the divergence in monetary policy and slowing eurozone portfolio inflows are reasons to sell the euro.
“We find European bonds to be expensive and therefore from a valuation perspective, further persistent inflows into Euro area’s fixed income markets may not materialize. Forecasting portfolio flows is fraught with difficulty, but given the strength of foreign appetite for European assets in the past two years and expensive bond valuations, it is not clear that a sustainable acceleration of foreign buying of European assets is likely as a result of the recent ECB decision,” Goldman Sachs writes.
