With respect to EUR/$, we think the Bund sell-off increases EUR/$ downside if tensions over Greece escalate further. This is because the ECB, including via the Bundesbank, would almost surely step up QE to prevent contagion. We estimate that the immediate aftermath of a default could see EUR/$ fall three big figures. The ensuing acceleration in QE would then take EUR/$ down another seven big figures in subsequent weeks,” GS adds.
„We thus see Greece as a catalyst for EUR/$ to go near parity, via stepped up QE that moves rate differentials against the single currency,” GS concludes.
GS maintains its EUR/USD forecasts at 0.95 in 12 months and 0.80 by end of 2017.