Morgan Stanley outlined its currency strategy and advised investors to take short positions in the currency pair, with a target of 0.82.
The company’s analysis shows that this transaction is likely to benefit from a combination of attractive volatility-adjusted carry and an expected rebound in UK economic growth momentum.
Morgan Stanley’s strategy is partly based on the expectation of a growing policy divergence between the Bank of England (BoE) and the European Central Bank (ECB). The company expects that this difference, especially in interest rate policy, could lead to larger interest rate differentials that could put downward pressure on the EUR/GBP exchange rate.
Morgan Stanley’s recommendations come in a complex global financial landscape, in which central banks’ monetary policy plays a crucial role in shaping currency valuations and interest rate expectations.
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