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Why The Euro Could Weaken Its Currency

Ryan September 21st, 2015
Why The Euro Could Weaken Its Currency


Goldman Sachs says the euro may fall up to 10 U.S. cents, as the European Central Bank is set to increase currency weakening stimulus to meet its inflation target.

The investment bank predicts the ECB will maintain significant easing at its current pace of 60 billion euros a month through the end of 2016.

An extension of the plan that was intended to run until September 2016, and only end it completely in mid 2017.

"Depending on how credible an upsizing to ECB QE is, we therefore see scope for euro to fall between six and 10 big figures," they wrote, referring to a drop of six to 10 cents.

The shared currency fell 0.6 percent to $1.1233 as of 10:07 a.m. New York time after slumping 1.2 percent on Sept. 18, the biggest decline since Aug. 26.

The euro rose 0.2 percent to 135.26 yen. And the dollar strengthened 0.3 percent to 120.39 yen.

Coeure and Executive Board member Peter Praet are scheduled to speak on Monday, followed by ECB President Mario Draghi taking part in a European Parliament hearing in Brussels on Wednesday.

The euro has strengthened 3.4 percent in the past three months, the third best performer of 10 developed nation currencies tracked by Bloomberg Correlation Weighted Indexes.

The yen was the best, rising 6.8 percent, and the dollar appreciated 4.6 percent.



Over to you

Will the extension of a stimulus be postive or negative for the European Central Bank? Do you agree or disagree with the prediction Goldman Sachs made about the stimulus? Share your opinion and thoughts in the comments below. 

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