Goldman Joins Deutsche Bank Abandoning $1 Euro Call By Year End

  • Both banks see euro staying above parity at least through 2017
  • Shared currency rises about 4% this year, derailing forecasts

Count Goldman Sachs Group Inc. among the growing list of banks abandoning their calls for the euro to reach parity with the dollar by the end of the year.

The New York-based bank joined Deutsche Bank AG this week in scrapping forecasts for the common currency to slump to $1 or below in 2016, citing changed outlooks for central-bank policy. Goldman Sachs sees the euro trading at $1.05 in 12 months, up from 95 cents forecast previously, analysts led by Robin Brooks, the bank’s chief currency strategist, wrote in a note on Friday. A day earlier, Deutsche Bank, the world’s second biggest currency trader according to Euromoney magazine, raised its year-end prediction to $1.05 from $1.

Strategists and investors are scrambling to revise their expectations for the euro after another round of easing from the European Central Bank failed to drive the common currency lower. It has advanced 4.1 percent since Dec. 31, confounding more than 80 percent of analysts surveyed at the time who expected weakness in the first half of the year. Then, 14 banks saw the European currency slumping to parity or below with the dollar by the end of 2016. Now just five hold that view, Bloomberg data show.

“We are doubtful that the ECB will be able to ease in an effective manner near term,” Brooks wrote in the note. “It is not the fundamentals that have tripped up the dollar. Instead, it has been central-bank behavior.”

The euro bought $1.1309 as of 5 p.m. in New York.

Both banks are sticking with forecasts for euro weakness over the long term.

Goldman Sachs expects the currency to slide to 95 cents in 24 months -- higher than the 90 cents previously forecast -- and 90 cents in 36 months, Brooks wrote in the note.

Deutsche Bank sees the euro at 90 cents by the end of 2017, Alan Ruskin and George Saravelos wrote May 12. That’s higher than an earlier forecast for the European currency at 85 cents.

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