Obviously, the dollar and the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the price movement of the U.S. dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, are key to the euro’s fortunes.
Looking ahead, Goldman projects the USD will appreciate 15% over the next two years as U.S. monetary policy normalizes.
Goldman analysts also pointed out that traders are increasingly looking to overseas central banks to gauge the dollar outlook. For instance, the European Central Bank and Bank of Japan have played a large role in the USD’s recent weakness.
“Strategists and investors are scrambling to revise their expectations for the euro after another round of easing from the European Central Bank failed to drive the common currency lower. It has advanced 4.1 percent since Dec. 31, confounding more than 80 percent of analysts surveyed at the time who expected weakness in the first half of the year. Then, 14 banks saw the European currency slumping to parity or below with the dollar by the end of 2016. Now just five hold that view, Bloomberg data show,” according to Bloomberg.