Nobody could see this coming, nobody. Then again, by now Goldman's irreplaceable FX strategist, perhaps the most valuable one ever (remember in finance batting 0.000 is the same as batting 1.000), most certainly has a form "mea culpa" letter.
Stopped out of long EUR/$ after dovish ECB and better payrolls
At the beginning of last week we opened a long EUR/$ recommendation on the back of continued improvements in the Euro area periphery, after Spanish PMIs suggested that the economy has about stabilised following many quarters of contraction. We continue to believe that this will lead to further narrowing in sovereign spreads in the foreseeable future, with EUR-positive implications. We also highlighted the strong differences in BBoP positions between the Euro area and the US.
In the event, a more dovish ECB than expected, emphasised by yesterday’s comments from Governing Council member Asmussen, and a sizeable positive surprise in US payrolls moved rate differentials sufficiently to offset the EUR/$ supportive factors. We closed the recommendation yesterday with a potential negative return of -2.1%.
The resulting jump in the EURUSD is not a coincidence.