Goldman Sachs: EUR/USD rally echoes 2017, but this time it's about the dollar ...Middle East

Key Points:

Goldman now sees EUR/USD at:

1.25 over the 12-month horizon

2017 Comparison:

Rate differentials remained stable, but a shift in fund flows provided upward pressure.

Today, euro strength is less about Eurozone fundamentals and more about dollar weakness.

Valuation Contrast:

This limits the upside potential and makes the current move more about dollar repricing than euro revaluation.

The structural USD shift supports EUR/USD upside but lacks the valuation tailwind seen in past long-cycle rallies.

Conclusion:

Goldman Sachs sees further upside for EUR/USD, driven by broad-based USD weakness and shifting global capital flows. While there are echoes of 2017, the current rally is more about a reassessment of US economic leadership and dollar valuations than a euro-area story. As such, 1.25 is possible, but the path higher will be steadier and more limited than in prior cycles.

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This article was written by Adam Button at www.forexlive.com.

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