New push is going to take his rally euro against him dollaraccording to analysts by Morgan Stanley, as European investors seek to compensate nearly 4 trillion. dollars of US assets.
The team led by David Adams, who has one of the most optimistic forecasts for the euro on Wall Street, says a rise of the euro over $ 1.30 “is not a danger to be underestimated”, as doubts about the dollar status as a secure shelter. This is an even higher prediction than the level of $ 1.27 awaiting by the end of next year.
The euro has risen 12% this year so far, due to expectations that hundreds of billions of defense and infrastructure costs will revitalize the economy. The unstable US policy under Donald Trump has also enhanced the attractiveness of the common currency.
Morgan Stanley is joining forces with Deutsche Bank, BNP Paribas and Barclays, providing further profits for the euro, as long -term European investors, including life insurance companies and pension funds, are looking for ways to protect their property from the dollar.
European investors hold a total of about 8 trillion. dollars in US fixed income and stock assets, with about 3.6 trillion. Dollars of this amount is not covered, according to Morgan Stanley’s team. Even a slight increase in the compensation index can have a “big impact,” Adams said. The bank estimates that about $ 400 billion from compensation flows in 12 months will generate 7% for the euro.
It also says that there will be more incentives for investors to offset US assets, as the cost of this protection will be reduced when the Fed reduces interest rates. Investors expect the central bank to reduce 25 base points in October.