Morgan Stanley outlined its currency strategy, recommending investors go short the currency pair with a target of 0.82.
The company’s analysis suggests the deal is likely to benefit from a combination of an attractive volatility-adjusted carryover and an expected boost to UK economic growth.
Morgan Stanley’s strategy is partly based on the expectation of a growing divergence in policy between the Bank of England (BoE) and the European Central Bank (ECB). The firm expects that this divergence, particularly in interest rate policy, could result in widening interest rate differentials, which could put downward pressure on the EUR/GBP exchange rate.
Morgan Stanley’s recommendations come amid a challenging global financial environment where central bank monetary policy plays a key role in shaping currency valuations and interest rate expectations.
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