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Morgan Stanley cut its EUR/USD forecasts on Monday as it expects the European Central Bank (ECB) to add further stimulus measures. It expects the currency to be at $1.03 by the end of the first quarter 2016, down from the previous estimate of $1.11.
"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," Morgan Stanley currency strategist Ian Stannard said.
The lender expect the ECB to lower its deposit rate by 0.1% and to purchase additional €15 billion from January 16. According to Morgan Stanley, the asset-buying programme should be expected to run until March 2017, longer than the current period until September 2016.
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