EUR/USD: Morgan Stanley's euro and dollar forecast for this week

As it does every week, this Monday 11 January 2016, Morgan Stanley gives its weekly forecasts for the euro and the dollar:

EUR: Is the relationship with risk sentiment broken?

"The EUR continued to weaken despite improved risk sentiment. We believe that this is related to the disappointing inflation figures, which increases the likelihood that the ECB will be forced into further monetary easing. Moreover, IMF data suggest that foreign exchange reserve managers are diversifying to the detriment of the euro. This process may have accelerated after the ECB has cut rates into negative territory."

USD: Our view remains bullish

"Unlike previous tightening cycles, this time we expect the USD to continue to rise due to the interest rate hike. The US economy does not seem particularly strong, but the US will remain the "least worst choice" in the region, which should attract capital from abroad."