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28 Jan 2015
Morgan Stanley: EUR/USD might approach parity – eFXnews
FXStreet (Barcelona) - The eFXnews Team notes Morgan Stanley sees EUR/USD approaching parity as EUR remains under significant pressure as a result of portfolio outflows, central bank reserve allocation and ECB’s QE, further targeting 1.0900 levels for the pair.
Key Quotes
“The ECB’s decision to expand its asset-purchase program keeps us bearish on the EUR. With the long-awaited sovereign QE announcement finally coming through and political risks not going away, EUR/USD could well approach parity”
“However, our bearish EUR view is not just about QE. We have made the case that the EUR is set to weaken as a result of previously announced monetary policy measures from the ECB, which have already had an impact.”
“We have highlighted three main channels for EUR weakness: portfolio outflows, the use of the EUR as a funding currency and central bank reserve reallocation. There is evidence that all three channels have already been exerting downward pressure on the EUR”
“Meanwhile, the latest data from the IMF shows that central banks, especially in EM, have been significant net sellers of EUR, reducing the weighting of EURs in their FX reserves. These represent a significant structural outflow from EMU, likely keeping the EUR under significant pressure over the longer term.”
“The addition of QE from the ECB will exacerbate these outflows, we believe, reinforcing the EUR bearish trend, hence our below consensus forecast for EUR/USD”
“MS maintains a limit order in its strategic portfolio to sell EUR/USD at 1.15, with a stop at 1.1650, and a target at 1.0900.”
This content has been provided under specific arrangement with eFXnews.
Key Quotes
“The ECB’s decision to expand its asset-purchase program keeps us bearish on the EUR. With the long-awaited sovereign QE announcement finally coming through and political risks not going away, EUR/USD could well approach parity”
“However, our bearish EUR view is not just about QE. We have made the case that the EUR is set to weaken as a result of previously announced monetary policy measures from the ECB, which have already had an impact.”
“We have highlighted three main channels for EUR weakness: portfolio outflows, the use of the EUR as a funding currency and central bank reserve reallocation. There is evidence that all three channels have already been exerting downward pressure on the EUR”
“Meanwhile, the latest data from the IMF shows that central banks, especially in EM, have been significant net sellers of EUR, reducing the weighting of EURs in their FX reserves. These represent a significant structural outflow from EMU, likely keeping the EUR under significant pressure over the longer term.”
“The addition of QE from the ECB will exacerbate these outflows, we believe, reinforcing the EUR bearish trend, hence our below consensus forecast for EUR/USD”
“MS maintains a limit order in its strategic portfolio to sell EUR/USD at 1.15, with a stop at 1.1650, and a target at 1.0900.”
This content has been provided under specific arrangement with eFXnews.