EUR/USD: the pair falls below 3-month target, what now? (Goldman Sachs)

Goldman Sachs notes that the EUR/USD has fallen sharply since the US election and is now under its 3-month target.

"Parity on the EUR/USD can be achieved earlier than we currently expect.

We continue to believe that the EUR/USD is still going to fall due to divergence of outlooks for growth, inflation and monetary policy.

At the December meeting, the ECB should announce an extension of the QE at the current rate until the end of 2017.

The EUR/USD is mostly driven by the dollar, but political risk in Europe adds downside risk to the pair.

To crystallise our bearish opinion on the EUR, we initiated our first trading recommendation that consists in the sale of EUR/USD and GBP/USD with the same weight."