Morgan Stanley Trims EUR/USD F'cast on ECB's Early Christmas Present

The euro will be weaker than previously thought, Morgan Stanley said on Monday, citing further easing from the ECB in December.

Frankfurt - Morgan Stanley analyst team on Monday cut its euro/dollar forecasts, as they believe that the European Central Bank (ECB) will give markets an 'early Christmas present' in the form of further monetary easing before the end of the year.

The investment bank behemoth now forecasts the euro at $1.03 against the US dollar 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 wrote in a note.

ECB easing

"We lower our forecast profile for euro/dollar, front-loading 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."

Explaining its decision, the bank said it expected the Frankfurt-based central bank to lower its deposit rate by 10 basis points at its December meeting and to increase the pace of monthly purchases by €15 billion to €75 billion from January 2016.

It also expects the central bank to extend the duration of its QE scheme by six months to March 2017.