3 reasons for the weakness of EUR from Goldman Sachs

Goldman Sachs notes the weakness of the euro and EUR/USD nudging year to date lows

  • is down 1.6% against the majors since early September
  • EUR/USD is just off fresh year-to-date lows
  • Over that period, the single currency has underperformed all of our models, where the fundamentals point to some deterioration but not to this degree
Offers up 3 reasons, none of which should come as much surprise, but a useful quick summary nonetheless:
we think this underperformance is likely a combination of 
  • lower real rate differentials (despite European nominals leading the charge higher, the change in policy expectations is not enough to offset the shift in inflation compensation), 
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