Goldman Sachs Exchange Rate Forecasts: USD vs GBP, EUR, AUD and NZD

The currency strategy desk at Goldman Sachs have issued their latest forecasts and ideas on the forex market for the week ahead.

In addition to the below forecasts which are relevant for the remainder of October we have another selection of predictions published here.

Today's Exchange Rates, Tuesday 28/10:

• British pound to euro: 0.02 pct lower on a day-to-day basis at 1.2692.
• Pound to dollar: 0.27 pct higher at 1.6161.
• Pound to Aus Dollar: 0.23 pct higher at 1.8273.
• Euro to dollar: 0.11 pct higher at 1.2712.

BE AWARE: All forex levels quoted here are inter-bank levels - when passing on a retail rate your bank levies a spread-charge. However, an independent FX analyst will guarantee to undercut your bank's offer, thereby delivering more currency. Find out more here.

• The below comes courtesy of Goldman Sachs' spot strategy team:

Pound Exchange Rate Forecast

Cable pared some of its losses following the weaker UK retail sales inspired sell off (3.1% v 3.4% cons.). Whilst we have seen better selling on the margin as London walked in, the lack of traction to the downside frustrates those involved.

The weakness in the sales number supports the MPCs concern about a recent about slowing growth out of the UK, however growth still remains robust compared to the rest of G10, with expectations for today’s GDP number still at a healthy 3.0% YoY.

Nonetheless, we maintain our small short bias given the trend in the data and the market’s preference to be long dollars. Our target for a weak number would be 1.5950/60, while we continue to lean again the resistance at 1.6080/84 with 1.6131 above. Levels for EURGBP remain 0.7846 below and 0.7950 above.

Euro Exchange Rate Forecast

Yesterday’s better German Manuf PMI gave the shorts cause for concern and we saw a decent amount of position covering, evidence perhaps that people do not have quite the conviction or are more financially sensitive than a few weeks ago.

I think the dollar should stay broadly on the front foot into next week’s FOMC and also believe the European dynamics are negative and the currency should stay heavy ahead of EZ HICP in a week’s time.

But I am a bit comprised between whether we are set to renew the downtrend and attack 1.25 or still broadly stuck in a consolidation pattern. As a compromise I have a moderate sized short, looking to add at 1.2680 with a 1.2730 stop. Support expected towards yesterday’s 1.2614 low, whilst a move below 1.2575 would suggest an acceleration to new lows is on the cards.

Australian and New Zealand Dollar Forecasts

A wider than expected trade deficit leads Kiwi to the 0.7780/95 support level before bouncing back to continue in its 0.7830/0.7870 holding pattern.

A large aircraft import accounting for roughly 1/3 of the deficit skewed the figure, but even with this stripped out the NZ$919m deficit was larger than expected.

With the cross having traded towards 1.1230 we set to retrace sub the figure – price action remains constructive with 1.1140/50 now support and 1.1280/1.1300 still the short term target.

AUDUSD recovers well off the 0.8719 overnight lows to settle back into the 0.8760’s and we will wait look towards equities to guide price action on the session. Looking into next week we are comfortable in retaining our short NZ$ bias vs both AUD and USD – the RBNZ next week are expected to remain firmly on hold, but there is significant scope for a dovish tilt.

CPI proved a meaningful downside surprise to RBNZ expectations, Fonterra projections for its 2014/15 payout appear elevated and without a bounce in the GDT index these need to be revised lower towards the NZ$4.2/4.4/kg level, Kiwi on a TWI basis has struggled to weaken over the first 3 weeks of October and only in the past 2 sessions have we seen a reaction. Intervention figures for the month of September are release on the 30th October too.