Morgan Stanley has forecasted a sharp decline in the euro, predicting a 7% drop against the US dollar by the end of the year.
The euro is expected to reach 1.02 against the dollar, edging closer to parity due to mounting concerns over political risks and economic fragility in the Eurozone.
David Adams, head of Group-of-10 foreign-exchange strategy at Morgan Stanley, identified the potential for significant interest-rate cuts by the European Central Bank (ECB) as the main factor behind the euro’s anticipated depreciation.
Adams highlighted the possibility of half-point rate cuts, suggesting the market may be underestimating the ECB’s capacity for aggressive monetary easing.
This bearish outlook, more pessimistic than the consensus among analysts, comes as the ECB is expected to announce a quarter-point rate cut at its upcoming meeting.
Additionally, the Eurozone’s slowing economic growth and heightened political uncertainty are likely to dampen capital inflows, adding further pressure on the euro.
