Morgan Stanley: Selling EUR/USD is our best trade for 2015

Analysts at Morgan Stanley has four reasons for selling EUR/USD in 2015.

Rationale:

1- EUR remains at risk from global deflationary pressure, given the relative openness of the eurozone economy and high debt levels.

2- The eurozone growth outlook is also set to remain subdued, keeping market expectations for further ECB action heightened.

3- However, we believe that the ECB policy measures taken already will be enough to keep EUR under pressure over the coming year.

4- Portfolio outflows and EUR being used as a funding currency are consistent with a longer-term structural decline.

Target:

“We favor selling EURUSD, targeting 1.12 for end-2015,” MS advises.

Risk:

“Risks to our bearish EUR view could come from central banks globally expanding their currency reserves, leading to renewed allocation into EUR,” MS warns.

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