Morgan Stanley has outlined its foreign exchange strategy, recommending investors take short positions in the currency pair, setting a target of 0.82.
The company's analysis suggests that this trade is likely to benefit from a combination of attractive adjusted volatility and an expected pick-up in UK economic growth momentum.
Morgan Stanley's strategy is based in part on the expectation of increasing policy divergence between the Bank of England (BoE) and the European Central Bank (ECB). The company expects that this divergence, particularly in interest rate policies, could lead to a widening of spreads that may exert downward pressure on the EUR/GBP exchange rate.
Morgan Stanley's recommendations come amid a complex global financial landscape, where central banks' monetary policies play a pivotal role in shaping currency valuations and interest rate expectations.
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