Synopsis:

Morgan Stanley remains bullish on EUR/USD, forecasting a move towards 1.08. Despite bearish macro sentiment on the eurozone and trade risks, a weaker USD due to lower US rates and fiscal concerns could provide upside support for the pair.

Key Points:

1️⃣ Bullish EUR/USD 📈 (Target: 1.08)

• USD Weakness: Lower US rates and concerns over a government shutdown could pressure the dollar.
• Rate Convergence: While short-term policy rates may widen, longer-end rates could begin converging, supporting the euro.
• Investor Positioning: Market sentiment remains broadly bearish on the euro, increasing the likelihood of a short squeeze.

Conclusion:

Morgan Stanley maintains a tactically bullish EUR/USD stance, expecting USD weakness to drive gains in the pair. If US fiscal risks and rate convergence play out, EUR/USD could catch investors off guard with an upside move to 1.08.