The dollar’s recent gains may reverse as narrowing interest-rate differentials
and slowing growth weigh on the currency, according to Morgan Stanley. The
greenback rose about 2% since the Iran conflict began, supported by safe-haven
demand and energy dynamics, while the euro and yen weakened.
Strategists led by David Adams at Morgan Stanley said the rally is “more likely
to be a ‘bull trap’ — a head fake where price action lures in investors, only to
suddenly reverse,” adding markets have “underpriced the growth-negative impact.”
The firm expects the Federal Reserve to cut rates twice this year, while the
European Central Bank may raise rates to counter inflation.
