Matt Hornbach, Global Head of Macro Strategy for Morgan Stanley, expects the US dollar to strengthen against the euro as real interest rates put downward pressure on the value of the EUR/USD pair.
Higher real interest rates in the US
“As long as real interest rates in the US rise gradually, as they have done so far this year, the overall level of interest rates in the US, as you can see in the Treasury market, should also rise gradually.”
“If US interest rates rise relative to those in Europe, which already began in August and we think will continue through the balance of the year, then the value of the US dollar should appreciate relative to the euro.”