ECB/NFP preview - Morgan Stanley sees euro gain if ECB avoids rate pushback, 1.30 longterm

The European Central Bank (ECB), under President Christine Lagarde, is poised to impact the euro's direction significantly at this week's policy meeting. Morgan Stanley notes that if Lagarde refrains from aggressively opposing the market's pricing for higher rates, the euro may strengthen further. They highlighted that recent euro-area inflation resilience and unexpected growth could fuel speculation. Technically, a sustained move above $1.1920 would pave the way towards $1.20, not seen since earlier post-pandemic recovery phases. Furthermore, a weak U.S. nonfarm payroll report could add downward pressure on the dollar, facilitating euro gains. Morgan Stanley remains bullish on the euro, envisioning potential upside towards $1.30 in the long term, conditional on favorable global conditions and shifts in U.S. rate expectations.