Morgan Stanley: Long-Term Dollar Bear Market, End 2027 EUR/USD Forecast 1.27 - Exchange Rates Org UK
Morgan Stanley's recent outlook posits that the U.S. dollar is entering a long-term bear market, projecting the EUR/USD to reach 1.27 by the end of 2027. This perspective stands in stark contrast to current market sentiments, which generally anticipate a stronger dollar in the near term as global economic conditions evolve.
What the desk is arguing
Morgan Stanley's forecast for a long-term bear market for the dollar is significant, especially with an end target of 1.27 for EUR/USD by 2027. This suggests a sustained weakening of the dollar against major currencies as macroeconomic factors, including inflation and interest rate policies, play out over the coming years.
The firm’s analysis suggests that structural changes in the U.S. economy and shifting monetary policies will facilitate this depreciation. Implicitly, they challenge the prevailing view among several analysts who see the dollar maintaining strength due to resilient economic data and hawkish Federal Reserve actions in the near term.
Where it sits in our coverage
Currently, the consensus target for EUR/USD is positioned at 1.2200 by December 2026, which reflects a relatively cautious outlook compared to Morgan Stanley’s long-term projection. The per-firm spread shows a range where most firms anticipate slight appreciation rather than the drastic appreciation forecasted by Morgan Stanley.
How other firms see it
Several firms are aligned with a more stable outlook for the dollar, contrasting Morgan Stanley's bearish position. These firms are banking on economic fundamentals supporting the U.S. dollar in the short to medium term.
- Goldman: Anticipates EUR/USD reaching 1.2500 by December 2026, suggesting stronger dollar support.
- JPMorgan: Projects a target consistent with moderate dollar strength at 1.2000 for December 2026.
- Barclays: Forecasts 1.2100 for the same time frame, indicating a more balanced view against dollar weakness.
How firms align with this view
Aligned with the desk view
Key takeaways
- 01Morgan Stanley forecasts a long-term dollar bear market with EUR/USD reaching 1.27 by 2027.
- 02Current consensus for EUR/USD targets is lower than Morgan Stanley's long-term view, reflecting cautious market sentiment.
- 03Several firms maintain a stronger dollar outlook in the medium term, diverging from Morgan Stanley's narrative.
Market implications
If Morgan Stanley's projections materialize, financial markets may witness a fundamental shift in forex trading strategies, focusing on currency weakening rather than strength. This could lead to increased volatility and shifts in demand for U.S. dollar-denominated assets and impact international trade dynamics.
Risks to this view
The main risks to Morgan Stanley's view include unexpected U.S. economic resilience, aggressive Fed policy adjustments, or geopolitical events that bolster the dollar. Additionally, a faster-than-expected resolution to inflation pressures could also undermine their bearish stance.
Sources & References
How we cover this story
Related news on this pair
Euro languishes near three-month lows against US Dollar despite progress in US-Iran talks
EUR/USD weakness persists despite risk-on conditions from Iran talks, suggesting USD strength is driven by macro fundamentals rather than risk sentiment.
Euro: Policy divergence supports against US Dollar – Rabobank
ECB-Fed policy divergence cited as structural EUR/USD support; widening rate differentials may limit dollar strength near-term despite US growth resilience.
Euro: Test of 1.140 seen before recovery against US Dollar – ING
ING positioning for EUR/USD test of 1.140 signals near-term dollar strength before mean reversion; watch for support breaks that could accelerate dips.
Euro weakens against US Dollar as hawkish Fed bets hog limelight
Market repricing Fed hold probability higher amid hawkish rhetoric, widening rate differential favoring USD/EUR longs.