As the European Central Bank prepares to increase its currency weakening stimulus, Goldman Sachs predicts that the euro may drop up to 10 cents.
The investment bank believes that the ECB will continue quantitative easing at 60 billion euros per month, its current rate, until the end of 2016.
Goldman Sachs analysts stated that this is representative of an upsizing of the original program, and will likely impact the currency. If an upsizing to the QE is credible, analysts say there is a scope for the euro to drop 6-10 cents.
On Monday, the EUR/USD pair dropped under 1.2. Just after the Federal Reserve’s decision to hold rates steady, the pair was trading above the 1.14 level. On Tuesday, the pair was holding steady at 1.1201, up 11 points.
Asian currencies were up as the Australian Dollar inched 4 points up to 0.7135, and the kiwi held at 0.6317. The EUR/JPY is now trading at 134.88, despite Japanese markets being closed.
World markets dropped amid uncertainty about global growth after the Federal Reserve held offon spiking interest rates on Thursday. Despite the hold-off, market experts still remain confident that a rate increase will occur before the end of the year.