22 May 2015
Morgan Stanley: Euro/Dollar has topped, USD completes its downtrend – eFXnews
FXStreet (Barcelona) - The Research Team at Morgan Stanley argues that the Euro/Dollar pair has topped on the USD upside rebound, as noted by eFXnews.
Key Quotes
“Risk appetite remains the key variable for judging the EUR. The EUR’s funding status suggests repatriation related inflows will occur when investors reduce risk exposure, while rallying equity markets would push the EUR lower.”
“The ECB is primarily relying on two transmission channels for its nonstandard monetary policy measures, we believe: i) higher portfolio valuations potentially unleashing demand via wealth effects, and ii) a lower EUR shifting relative competitiveness in favour of the eurozone.”
“High bond market volatility can block these channels by weakening the outlook for risky assets, while simultaneously pushing the EUR higher. At this stage the EMU economic recovery seems too fragile for the ECB to allow monetary transmission to weaken. Hence, we would expect the bank to verbally intervene whenever it feels it has to unlock these channels. This weekend’s ECB Forum provides a platform to communicate with markets.”
“It will be potential US data strength that steers the outlook for the USD...Our analysis indicates both the USD and GBP are in a strong position. EUR weakness should be steered by the ECB and its attempt to keep monetary transmission intact.”
“MS maintains its EUR/USD forecasts at 1.04 by Q2-end, 1.03 by Q3-end, and 0.98 by year-end.”
This content has been provided under specific arrangement with eFXnews.
Key Quotes
“Risk appetite remains the key variable for judging the EUR. The EUR’s funding status suggests repatriation related inflows will occur when investors reduce risk exposure, while rallying equity markets would push the EUR lower.”
“The ECB is primarily relying on two transmission channels for its nonstandard monetary policy measures, we believe: i) higher portfolio valuations potentially unleashing demand via wealth effects, and ii) a lower EUR shifting relative competitiveness in favour of the eurozone.”
“High bond market volatility can block these channels by weakening the outlook for risky assets, while simultaneously pushing the EUR higher. At this stage the EMU economic recovery seems too fragile for the ECB to allow monetary transmission to weaken. Hence, we would expect the bank to verbally intervene whenever it feels it has to unlock these channels. This weekend’s ECB Forum provides a platform to communicate with markets.”
“It will be potential US data strength that steers the outlook for the USD...Our analysis indicates both the USD and GBP are in a strong position. EUR weakness should be steered by the ECB and its attempt to keep monetary transmission intact.”
“MS maintains its EUR/USD forecasts at 1.04 by Q2-end, 1.03 by Q3-end, and 0.98 by year-end.”
This content has been provided under specific arrangement with eFXnews.