Goldman Sachs has cut its forecasts for the euro this year and expects the single currency to drop below parity by end-2017 as part of a broad downward trend begun in the second half of last year. In a research report released on Friday, it lowered the forecast the euro/dollar to $1.14 in three months time, down from the previous forecast of $1.23. It also expects the euro to drop to $1.11 in six months, compared with the previous forecast of $1.20 and to $1.08 in 12 months, down from $1.15 earlier.
"We are also revising down our longer-term forecasts, bringing the end-2016 forecast to $1.00 (from $1.05) and that for end-2017 to $0.90 (from $1.00)," the US investment bank said in a research report.
"These changes underscore our view that the recent slide in the single currency is part of a broad trend, which will see the euro undershoot 'fair value' (around 1.20) on the weak side."
The euro fell to a 9-year low against the dollar this week on growing expectations that the European Central Bank will announce outright government bond buying within weeks to ward off a prolonged cycle of falling prices and wages. The Bank's governing council meets on January 22.