Article
【Morgan Stanley turns bullish USD: High yields will continue to squeeze global risk appetite】
Morgan Stanley has revised its previous bearish USD assessment and expects USD strength to continue through 2027 mid-year. The bank forecasts that the USD index will rise to 104，EUR against USD could fall from approximately 1.14 USD to 1.10 USD. The report argues that expectations of further Federal Reserve rate hikes, the resilience of the US economy, and persistently elevated energy prices will all sustain the relative advantage of US interest rates and continue to support USD. This assessment closely aligns with recent market conditions.September 25, the US Treasury 10-year yield remains at a high level of approximately 5.2%, while the USD index is fluctuating around 101; although US equities stabilized at the open, supported by optimism surrounding AI, and Bitcoin was also hovering around 84900 USD, high yields continue to constrain the valuation scope of risk assets. Morgan Stanley had previously revised its Fed path to December and 2027 year March rate hikes of 25 basis points each, bringing the federal funds rate target range to 4.25% -4.5%, where it may remain in 2027. For the foreign-exchange market, this means that the interest-rate differential advantage between the US and other major economies will be difficult to narrow quickly. The report also identifies European political risks as an additional source of pressure on EUR, including the French presidential election in spring 2027, as well as election risks in Germany and Italy.EUR If the risk premium continues to rise, it will, together with the US interest-rate advantage, push up USD。