MS is keen on the euro against a basket of currencies

  • Long EUR vs. USD, CHF, GBP and SEK
Analysts cite as positives:

  • The recent EU debt proposal means that some of the risk premium for EU break-up risk which has been embedded in European assets since the eurozone debt crisis will abate.
  • The creation of a new large and liquid (likely), higher-yielding AAA asset will attract inflows from real money investors and reserve managers alike and support EUR higher.
  • We expect the EUR rally to come in stages - initially positioning and sentiment adjustment (no longer bearish) followed by active allocation to eurozone assets via equities as growth picks up.

And, risks for the view:

  • Trade tension escalation creates safe-haven demand for USD
  • Eurozone recovery disappoints


  • their base case is to 1.20 by Q2 2021
  • 'bear' case is 1.114, 'bull' case is 1.26