The FOMC came up roses for Morgan Stanley
USD permabulls, Morgan Stanley got all they wanted for Christmas last week. The Fed delivered a hawkish message of three potential hikes for 2017 and EURUSD broke the 2015 lows.
"USDJPY remains our biggest buy, with our target of 130 looking
less ambitious by the day. EURUSD has now broken through the March 2015
1.0463 low and we believe should head toward parity by the end of 2017. The
AUD is another favoured short, with our portfolio still filled with short AUDNZD
and AUDCAD. With a rising USD, rising real US yields and equity markets looking
increasingly overstretched, we add a long USDKRW position back into our portfolio.
Surprising Fed hawkishness has driven the USD higher across the board. The Fed
now expects three hikes in 2017 relative to the two they expected previously.
Rates markets entering into a bearish flattening environment put risk appetite
under some pressure if markets worry that the Fed could tighten too quickly"
For all their bullishness on the dollar, they don't actually have any positions on, bar long USDKRW.
Here's their brief for some of the majors.
