Morgan Stanley sees the euro falling to 1.02 this 12 months because the ECB cuts deeper

The street-low year-end forecast for the euro is 1.02 from Morgan Stanley. G10 FX strategist David Adams spoke in an interview with Bloomberg today highlighting the call.

“There is plenty of scope for the market to refocus on the fact that the
ECB could be cutting deeper and faster than what is currently priced,”
said Adams, who formerly worked at the Federal Reserve Bank of New York.
“This week’s meeting could prove an important catalyst for the market
to start thinking about that.”

Current pricing pricing is for a cut in September but less than a 50% chance of another cut in October. For year end, 63 bps are priced in for the remaining three meetings.

“If data continue to deteriorate further in Europe, the market has to
start thinking about not just 25 basis points a quarter but maybe 25
basis points every meeting or perhaps even the risk of a 50 basis-points
cut, much in the same way the market has applied concerns about a
slowdown in the US to a faster and deeper cutting cycle from the Fed,”
he said.

A drop to 1.02 would be the lowest since November 2022 and it would be a dramatic move to get it there. I do appreciate an out-of-consensus call.