The European single currency could drop by 7% versus the US dollar due to a risk of major rate cuts, the US banking giant says
Morgan Stanley came across strong in making advances on the fact that the euro will depreciate claiming that the euro will get to the level of the dollar more in the next few months. Still, the investment bank explains this anticipated downfall by growing political risk and economic turmoil in the region.
David Adams, Morgan Stanley’s foreign-exchange strategist, who is responsible for Group-of-Ten strategies, says that the euro will be worth 1.02 against the dollar at the end of December representing about a dollar loss worth seven percent of its current worth. He made these remarks in an interview with Bloomberg.
Adams elaborated that the forecast hinges on the assumption that Ecb will aggressively go, at the next three meetings, even deeper than expected, and some economists may flirt with a half-point shift. ‘There is so much excess potential in the economy that the market knows very well that the ECB may go deeper and may go as fast as they want. They may go faster than the current expectations. There is room for this.’ Adams says this week’s ECB meting may be the point where the market may change its expectations.
This estimate is the most negative of all currency forecasters polled by Bloomberg analysts, whereas other analysts believe that the euro will reach 11 dollars at the end of two years. As seen, however, attention is largely on the rate setting exercise, which the European Central Bank (ECB) is again undertaking.
