Investing.com - Analysts at Goldman Sachs (N:GS) on Monday abandoned their prediction that the euro would fall below parity with the dollar next year, after the latest round of European Central Bank stimulus measures fell far short of market expectations.
Goldman said it now believes the euro will be trading around $1 in a year’s time and not at $0.95, as it previously expected.
The bank revised its forecast for the euro-dollar pair to $1.07 in three months, $1.05 in six months and $1.00 in 12 months from $1.02, $1.00 and $0.95 previously.
It has also raised its end-2017 forecast from $0.80 to $0.90.
Goldman said its previous certainty that the ECB will do whatever it takes to generate inflation has weakened.
“What mattered last week was whether the ECB sent a message consistent with President Draghi's speech in Frankfurt on November 20, one that signaled a sense of urgency over the need to confront low inflation. It did not,” the bank said.
The single currency posted its largest one-day gain against the dollar in more than six years on Thursday, jumping 3% after the ECB extended the duration of its bond-buying purchase program.
ECB President Mario Draghi said the bank would expand its bond-buying purchase scheme beyond the current cut-off point of September 2016 until the end of March 2017, or beyond if necessary.
But the pace of the QE program remained unchanged at €60 billion per month, disappointing expectations that the central bank would speed up its bond-purchasing scheme.
The ECB also lowered the deposit facility rate to -0.3% from -0.2%, disappointing some analysts’ expectations for a deeper cut to -0.4%.