Goldman Sachs and Morgan Stanley: Sell the Euro
And so the two most “credible” investment banks have had their say on the EURUSD (NYSE:FXE) as a result of today’s 250 pip surge in the EURUSD: while Goldman earlier said to buy, buy, buy (i.e., sell) every EURUSD pip until 1.40, here is Morgan Stanley (NYSE:MS) with the mirror image call.
Today we entered a short EUR/USD trade at 1.3750. While Italian 10-year bond yields have tightened from the highs reached earlier this week, we believe yields still well above 6% are unsustainable for a debt market of 1.9tr EUR (third largest in the world). This means that Italy will need to spend nearly 10% of its annual GDP on interest payments alone. Meanwhile, political uncertainties add to concerns in the Eurozone, with new regimes in Greece and Italy. We remain fundamentally bearish on EUR, and believe it will retest 1.30 as Italy runs the risk of being “too big to save.”
Confused yet? Why bother. Maybe Goldman (NYSE:GS) can just skip the foreplay, dump its entire EUR inventory to Morgan Stanley and spare everyone else the drama and paternity tests.
Tyler Durden is the author of Zero Hedge.