Bloomberg News

Goldman Reduces Euro Forecasts as Fiscal Tensions Increase

September 14, 2011

(Adds comment from the report in the second paragraph.)

Sept. 14 (Bloomberg) -- Goldman Sachs Group Inc. said it lowered forecasts for the euro versus the dollar as fiscal tensions in the region increase.

The shared currency will trade at $.140 at the end of the year, down from $.145, the New York-based firm said in note to clients today. It also reduced its six- and 12-month outlooks to $1.45 and $1.50, from $1.50 and $1.55 respectively. Analysts led by Thomas Stolper, chief foreign exchange strategist in London, “continue to expect euro-dollar to rise again, albeit from a slightly lower starting point.”

Failure of euro area governments to calm market concern over Greek default and contagion, relatively little additional fiscal tightening in the U.S. and weaker-than-expected global economic data contributed to the revisions, according to the report.

“The extent of the friction and the relative weakness of the policy response was not our core scenario,” the analysts wrote.

The euro rose 0.6 percent to $1.3754 at 4:55 p.m. in New York from $1.3678 yesterday.

--Editors: Dave Liedtka, Paul Cox

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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