Why the euro-dollar could collapse by 7% by the end of 2024? All the reasons for the potential collapse of the single currency according to Morgan Stanley’s forecast.
EUR-USD set for a tumble thanks to the ECB’s monetary policy: this is the forecast of Morgan Stanley experts.
The US bank expects the community currency to slide towards parity with the greenback in a few months, with the downward pressure from the Eurotower and its path of rate cuts. The pair could thus fall by 7% according to the projection, among the most bearish so far.
At the time of writing, EUR/USD is defending small gains near 1.1050 in the European session. Reduced bets for a 50 bps Fed rate cut allow the dollar not to sink in a climate of caution, while the euro struggles to gain ground on the accommodative expectations of the ECB.
Why the Euro-Dollar May Collapse, According to Morgan Stanley
Morgan Stanley expects the single currency to collapse to $1.02 by the end of the year, a depreciation of about 7% from current levels, its head of currency strategy, David Adams, said in an interview.
That view is based on Monetary Policy forecasts that the ECB is targeting further rate cuts at its next three meetings, along with the potential for a move of half a point.
The call is the most bearish among currency analysts polled by Bloomberg, with the consensus forecasting that the euro will end the year at $1.11. The estimate comes ahead of an expected quarter-point rate cut at the ECB’s meeting on Thursday, Sept. 12, as traders focus on the outlook for the coming months.
Money markets are currently betting on around 60 basis points of easing in Europe this year, compared to around 110 basis points in the US.
It’s not just the ECB that’s in the crosshairs of currency analysts. Adams has been recommending a short euro-dollar in options since February, believing that the US elections in November could give the greenback a boost. Growing political uncertainty in Europe is now reinforcing his conviction that the euro is trending lower.
While attention has been focused on French politics in recent months, Adams believes that German political developments – with the far-right victory in Thuringia – are equally worrying for the region’s long-term stability.
“Political risk premiums and uncertainty are rising at a time when economic growth is slowing. Both of these factors suggest that investors may be less willing to put capital into the region,” the strategist explained. The ECB and others, therefore, could push the euro into a tailspin.
Original article published on Money.it Italy 2024-09-10 10:53:07. Original title: L’euro crollerà del 7% sul dollaro entro il 2024, la previsione
