Currency Management Strategy for Euro Investments

Global Investment Partners (GIP) manages a wide-ranging portfolio invested in various asset classes across multiple currencies. Recently, the firm's portfolio manager, acting in response to heightened geopolitical risks, is considering implementing a currency hedge strategy for their Euro-denominated investments. The firm has dedicated analysts who forecast macroeconomic trends and currency movements.

The firm gathers data that indicates the Euro is expected to weaken against the US Dollar due to anticipated monetary policy divergence. GIP must decide whether to engage in a currency-forward contract or opt for a different hedging strategy. The decision has implications not only for potential returns but also for the risk management framework of the portfolio.

Given this scenario, which currency management strategy would most effectively mitigate risks associated with currency fluctuations while allowing GIP to maintain exposure to potential upside movements in the Euro?