Morgan Stanley foresees euro decline
Date
9/18/2024 8:19:56 AM
(MENAFN) investment bank Morgan Stanley has forecasted a significant decline in the euro, projecting that it will fall toward parity with the US dollar in the coming months. In a recent interview reported by Bloomberg, David Adams, head of Group-of-10 foreign-exchange strategy at Morgan Stanley, indicated that the euro could depreciate to approximately USD1.02 by the end of the year, reflecting a decrease of around 7percent from its current value.
This bearish outlook stems from increasing Political risks and economic weaknesses within the Eurozone. Adams noted that the European Central Bank (ECB) is likely to continue its trend of interest-rate cuts in the upcoming meetings, with the potential for a substantial half-point reduction. "There is plenty of scope for the market to refocus on the fact that the ECB could be cutting deeper and faster than what is currently priced," he stated. The forthcoming ECB meeting could serve as a pivotal moment for the market, prompting a reassessment of interest rate expectations.
Interestingly, Morgan Stanley's forecast stands out as the most pessimistic among currency analysts surveyed by Bloomberg, with the general consensus anticipating that the euro will actually appreciate to USD1.11 by the end of 2024. As traders prepare for the ECB's rates decision later this week, the regulator is expected to implement a quarter-point rate cut, marking the second reduction in the current cycle as the Eurozone grapples with sluggish economic growth.
Adams emphasized that rising political risk premiums and uncertainties are coupled with a slowing economy, factors that could lead investors to be more cautious about deploying capital in the region. As the euro faces these mounting challenges, the outlook for the European economy remains uncertain, with many eyes on the ECB's upcoming decisions and their potential impact on the currency's trajectory.
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