Morgan Stanley outlined its foreign exchange strategy, recommending investors to take short positions in the currency pair, with a target set at 0.82.

The firm’s analysis suggests that this trade is likely to benefit from a combination of attractive volatility-adjusted carry and an anticipated upswing in UK economic growth momentum.

Morgan Stanley’s strategy is partially based on the expectation of a growing policy divergence between the Bank of England (BoE) and the European Central Bank (ECB). The firm anticipates that this divergence, particularly in interest rate policies, could lead to widening rate differentials that may exert downward pressure on the EUR/GBP exchange rate.

Morgan Stanley’s recommendations come amid a complex global financial landscape, where central banks’ monetary policies play a pivotal role in shaping currency valuations and interest rate expectations.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.