Investment bank Morgan Stanley has projected a significant decline in the euro, predicting a 7% drop against the US dollar by the end of the year.
The euro is expected to hit 1.02 versus the greenback, approaching parity amid growing concerns over political risks and economic weakness in the Eurozone.
David Adams, head of Group-of-10 foreign-exchange strategy at Morgan Stanley, pointed to the likelihood of substantial interest-rate cuts by the European Central Bank (ECB) as the primary driver for the euro's expected depreciation.
With possible half-point cuts in the pipeline, Adams noted that the market could be underestimating the ECB’s potential for aggressive monetary easing.
The forecast, which is more pessimistic than the consensus among analysts, comes ahead of the ECB's anticipated quarter-point rate cut at its upcoming meeting.
The region’s slowing economic growth and rising political uncertainty are also seen as factors limiting capital inflows into the Eurozone, further pressuring the currency.
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