Only Goldman can call the direction of the biggest FX trade of 2015 - namely the collapse in the EURUSD - and still have a complete lose on the trade.
Recall that exactly one year ago, Goldman revealed its top trade for 2015, namely betting on EUR/$ downside via a one-year EUR/$ put spread. From the bank:
Position for EUR/$ downside via a one-year 1.20/1.15 put spread for around a 4.5 to 1 potential maximum payout.
We forecast that EUR/$ will fall to 1.15 over the next 12 months, in equal parts a reflection of our Dollar bullish view and Euro bearish outlook. In particular, given that HICP inflation is unlikely to rebound in coming months, there is a chance that additional ECB easing, including possibly sovereign QE, comes sooner rather than later, setting the stage for EUR/$ to move meaningfully lower in the short term.
On the surface this should have been a winning trade as the EURUSD currently trades well in the money. However, what happened in the interim is that Goldman, sensing the major payouts it would have to make to all those who put the trade on, decided to drag everyone deeped underwater and revised the strikes from 1.20-1.15 to 1.00-0.95.
The result: Goldman's top trade for 2015 just expired out of the money. From Goldman:
Today we close our last remaining Top Trade recommendation to be short EUR/$ via a 1.00 – 0.95 put spread (initially struck at 1.20-1.15 with spot at 1.25), which expires out of the money incurring a loss of premium.
Actually, the loss is only for the clients. The winner? The counterparty which pocketed said premium from Goldman's clients. Goldman Sachs.
Our initial target levels were reached sooner than expected and, aside from the August spike, EUR/$ has traded below 1.15 since January. However, our revised targets proved too ambitious for our 12-month timeframe. Following the March FOMC, the combination of a dovish Fed, the US Q1 growth scare and the Bund sell-off contributed to a reversal in EUR/$. Nevertheless, the recent move lower reflects the policy divergence we expected throughout the year, and we continue to think the combination of ECB easing and Fed tightening – likely to become concrete in December – will drive EUR/$ to 0.95 in 12 months.
Considering Goldman's track record of steamrolling muppets on every turn, the probability that the EURUSD will have surged into the 1.20 range or higher in 12 months is about 100%.