Goldman Sachs has suggested that the euro (EUR) should now be considered a preferred funding currency over the Japanese yen (JPY) and Swiss franc (CHF). This recommendation reflects shifting dynamics in the global forex market, driven by interest rate differentials, central bank policies, and broader economic trends.
Interest Rate Differentials and Monetary Policy
The eurozone, led by the European Central Bank (ECB), has maintained relatively low interest rates compared to other major economies, despite gradual increases to tackle inflation. While the ECB has been raising rates over the past year, its policy remains more accommodative compared to central banks like the U.S. Federal Reserve or the Bank of England. Meanwhile, both the Swiss National Bank (SNB) and the Bank of Japan (BoJ) have signaled tighter monetary policies as they aim to normalize interest rates after years of extreme dovishness. The BoJ, in particular, may soon end its ultra-loose monetary policy, causing the yen to strengthen.
