Dollar a Sell Against Euro, Pound and Yen Says Morgan Stanley - Pound Sterling LIVE

What the desk is arguing

The desk is expressing a strong view that the dollar should be sold against the euro, pound, and yen. Per the full note from Morgan Stanley, this perspective is rooted in the anticipated relative strength of these currencies as central banks in the respective regions adjust their monetary policies.

Supporting this view, recent shifts in positioning and economic indicators suggest that investors are beginning to favor currencies that show potential for growth or stability, particularly in light of concerns surrounding the US economy. Additionally, global risk sentiment appears to be favoring assets outside the dollar sphere, with ongoing recovery narratives in Europe and Asia reinforcing this thesis.

Where it sits in our coverage

Our consensus target for EUR/USD currently sits at 1.075 with a range between 1.04 and 1.12 sourced from various firms. Notable targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

This bearish stance on the dollar is somewhat aligned with jpmorgan's target that positions the euro significantly stronger. However, it contrasts with bofa's more cautious perspective, which suggests a tighter range at the lower end, indicating divergent expectations on dollar strength.

How other firms see it

A number of institutions appear to align with the bearish outlook on the US dollar, including jpmorgan supporting this trend towards major G10 currencies, while bofa holds an opposing view.

Traders should also monitor the EUR/USD trajectory, given its direct connection to ECB activities, as well as the USD/JPY pair which could react sharply to BoJ policies going forward.