How to trade the majors this week – Morgan Stanley

What to watch for this week in the euro, yen, pound and more
From Morgan Stanley:
For bank trade ideas,
We remain bullish on EUR and stick to our quarter-end target of 1.16 for EURUSD. The Eurozone economy has held up well post-Brexit, supported by the recent release of Eurozone August flash PMIs. This increases the risks of the ECB not having to ease significantly beyond what markets have priced. Even if the ECB extends its QE programme or cuts rates further, we think it will not be able to push down long-term bond yields substantially to weaken the currency, as Eurozone bond yields are already low or negative. Data weakness in the US has also caused the spread between the Eurozone and US economic surprise indices to widen significantly since July, reaching levels last seen in May when EURUSD traded at 1.15, further supporting our argument for a higher EURUSD.