LONDON (Reuters) – U.S. investment bank Goldman Sachs said on Wednesday it had cut its euro/dollar forecast for the next 3, 6 and 12-months because of uncertainty stemming from Italy’s political crisis.
The bank said it forecast the euro to trade at $1.15 over the next three months, versus $1.20 previously. It also cut its six-month forecast to $1.20 from $1.27 and the 12-month forecast to $1.25 from $1.30.
The euro has slumped this week to its lowest in 10-months, at around $1.15 <EUR=EBS>, after an attempt by two Italian parties to form a government collapsed, fanning fears of a fresh election that could become a de facto referendum on Italy’s membership of the euro zone.
“Although we remain structurally positive on the currency, it has become difficult to envision significant appreciation over the near term,” Goldman analysts said in a note.
(Reporting by Helen Reid and Tommy Reggiori Wilkes; editing by Sujata Rao)