Goldman Sachs has removed the euro from the list of major currencies to outperform the dollar after the US election.
The Wall Street giant recommended a series of short positions for the dollar against G-10 currencies in early October, warning that the risks posed by vaccine trials and the US election would skew downward for the greenback Huh.
However, both France and Germany announced fresh lockdown measures last week and the European Central Bank (ECB) strongly indicated that it would further ease monetary policy in December, complicating the outlook for the common currency.
“On the one hand, the US election will likely boost all cyclical assets including the ‘blue wave’ scenario and the vaccine con ation rmation (expected in November),” Goldman Sachs Global FX, rates and EM strategy co-head of Zach Said in a note on Monday.
“On the other hand, the near-term euro area gross domestic product (GDP) growth could hit other sectors badly, and we would expect markets to partially cut the deposit rate, even as the Governing Council Finally ‘reorganize’ other devices. “
Goldman has therefore removed the euro from the basket of G-10 currencies that outperformed the dollar, allowing the Canadian and Australian dollars to remain in position for longer. Borrowing a currency in short trades in currencies and selling it at the current market rate, with a view to buying it back at a lower price, is in essence the condition that the currency will depreciate.
Pandal’s team continues to have favorable risk-reward for being less risky against the dollar due to event risks in November, with the confirmation of the Kovid-19 vaccine as a global growth outlook and a possible Democratic sweep of US elections also “pro-cyclical” Are in favor of currencies, whose strength generally corresponds to the global economic outlook.
“However, looking forward, the winter Kovid lockdown spectators present a risk to pro-cycle trades in general, including shorts in dollars,” said Pandal.
“We think that if a safe and effective vaccine was – rmed – then investors would see through a temporary stretch in activity – because we might have high-grade con dence that would reverse the activity soon.”
Pandal also recommended keeping the Chinese yuan until the election results were clear, suggesting that the recent strengthening of the markets came in part due to rising prices in one of the markets, Joe Biden’s victory.
Goldman analysts believe this trade may continue, and expect USD / CNY to reach 6.50–6.60, before advising investors to step back and assure the outlook.