Morgan Stanley lowered its euro/dollar forecasts on Monday, citing further monetary easing measures by the European Central Bank before the end of the year. The US investment bank expects the ECB to cut its deposit rate by 10 basis points at its December meeting and to increase the pace of monthly purchases by 15 billion euros to 75 billion euros from January 2016. It also expects the central bank to extend the asset purchase programme by six months to March 2017. It forecast the euro at $1.03 by the end of the first quarter of next year, compared with $1.11 previously.
"We expect the euro to come under renewed selling pressure going into the end of the year and early next year as a result of the increased potential for further easing from the ECB," Morgan Stanley currency strategist Ian Stannard said. "We lower our forecast profile for euro/dollar, frontloading our anticipated euro/dollar decline into year-end and the first quarter of next year. We now project euro/dollar at $1.06 by end-2015 and $1.02 by mid-2016, but still ending 2016 at $1.00."