Morgan Stanley has been consistently bearish on the euro.
In it's latest FX Pulse note, Morgan Stanley's Global Currency Research team led by Hans Redekar just got even more bearish.
Specifically, Redekar lowered his 2012 year-end target on the euro to $1.15 from $1.20.
From the note:
EUR revised lower.
We have revised our already bearish EURUSD forecast lower, now expecting a decline to 1.15 in 2012 (previous forecast 1.20). While we expect central banks globally to continue to provide liquidity, it is the ECB’s position that has changed the most dramatically. The relative expansion of the ECB’s balance sheet is EUR bearish in our view. We also highlight the relative effectiveness of monetary policy, and suggest that relative EMU-US monetary velocity also points towards a lower EURUSD.
Fiscal austerity pushes Eurozone into recession.
We expect the Eurozone to move into recession as fiscal consolidation tightens its grip, requiring a further easing of monetary policy. The fiscal compact has been welcomed by the ECB and potentially provides increased monetary policy flexibility. The combination of tight fiscal and loose monetary policy will keep the EUR under pressure.
...
Global growth risks to our view.
The biggest risk to our view is that global growth is significantly stronger than currently anticipated. A strong global recovery would suggest that Europe could be able to generate sufficient net exports to support growth, reducing the need for a weak EUR.
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