Morgan Stanley’s dollar forecast marks the end of Greenback’s 15-year domination, with analysts now predicting structural changes as the US dollar trend drops. The forecast for investment bank bearish bank Morgan Stanrador is that economic headwinds are mounted, and Dollarbull Run faces unprecedented challenges along with a range of policy uncertainties. This actually represents a major departure from US exceptionalism, which has pushed the Dollar Bull Run since 2010, even if the market expects continuous strength.
The strength of the euro increases as the Dollarbull Run collapses
Structural changes in the currency market
James Lord, Morgan Stanley’s top global Forex strategist, outlined the company’s paradoxical Morgan Stanley dollar forecast earlier this year, with the consensus hoping for a continuation of US exceptionalism after Trump’s election. However, Morgan Stanley predicted a variety of results based on his analysis.
The Lord said:
“From 2010 until the end of last year, the dollar has been in tears.”
The decline in the US dollar trend is driven by immigration restrictions, a lack of fiscal stimulus and the implementation of trade tariffs. The main highlighted that the US faces a 4% GDP current account deficit in slowing its growth environment.
Federal Reserve Policy Accelerates Decreas
Morgan Stanley Dollar’s forecasts have already exceeded its initial targets, which has led the company to expand its forecasts with a medium-term outlook. The Lord noted that even reaching the Eurodollar Bull Case target at 1.30 indicates a significant shift from the previous Dollar Bull Land Dynamics.
The Lord explained:
“We may have to go towards the target of 130 bulls of the Eurodollar.”
At the time of writing, Morgan Stanley US Economics Research expects the Fed to cut interest rates to 2.5%, which puts more pressure on the US dollar decline. This incredible pivot actually represents a dramatic departure from previous monetary policy, continuing to undermine the running of dollar bulls that dominated the market for more than a decade.
Impact on European markets
Morgan Stanley’s European equity strategist Marina Zavoloch analyzes how the US dollar’s fall affects European equities, and her research reveals that more than half of the European index faces negative exposure to the strength of the euro. Currently, they benefit from around 30% from these currencies movements.
Zavolock said:
“They infiltrate new highs almost every day compared to the index.”
The sectors benefiting from this shift have seen strong expansion in utilities, real estate and banking as Morgan Stanley’s dollar forecasts come into effect. Companies with advanced hedging programs show lower volatility compared to companies without proper Forex risk management.
Zavolock emphasized the importance of currency-adjusted metrics.
“European revenue growth at this point is 7.6% on the dollar terms.”
This highlights how the end of the Dollar Bull Run creates opportunities for European companies when measured in dollar terms, despite the fact that local currency performance appears to be weak due to the enhancement of the euro and other currencies, due to translation effects.
