Exchange Rate Forecasts for the British Pound, US Dollar and Euro Conversions

Meanwhile, the US dollar complex is predicted to maintain a positive bias. We hear from Morgan Stanley who gives us their latest forecasts for the week ahead.

At the time of writing (10/09) the following forex rates are seen:

• The British pound to euro exchange rate (Pound Conversion to Euro): 0.23 pct higher at 1.2479. For the latest on GBP's sell-off please see here.
• The British pound to dollar exchange rate (Pound Conversion to Dollar): 0.14 pct higher at 1.6130.
• The euro to dollar exchange rate (Euro conversion into US Dollar): 0.09 pct lower at 1.2926.

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Euro Forecast: More Losses This Week, Morgan Stanley Target EUR/USD at 1.20

Analysts at investment bank Morgan stanley confirm they retain a bearish stance towards the euro exchange rate complexion the medium term.

In a weekly outlook note analysts tell us:

"The ECB met heightened market expectations, announcing an ABS/Covered bond purchase as well as cutting rates, triggering a sharp decline in the EUR through our initial 1.31 target.

"While we have taken profits here, we maintain our long term bearish view, expecting a decline to 1.20 in 2015.

"However, given the likely near-term constraints of extreme short positioning we await a rebound to re-enter bearish strategies."

British Pound Forecast: Uncertainty Wil See Further Weakness

Turning to the UK's pound sterling our key uncertainty will be the reaction by markets to news that Scotland is heading towards independence. We saw the impact last week's YouGov poll had on the currency, Monday's open will be keenly watched.

Morgan Stanley tell us:

"We believe GBP will continue to be sold in advance of the upcoming Scottish referendum.

"As the ‘Yes’ and ‘No’ polls show a closer election, sterling should reflect a heightened risk premium.

"Indeed, a ‘Yes’ vote could increase UK debt levels, push back the timing for the expectation of the first BoE hike, and foreshadow uncertainty for the May 2015 general elections. We are cautious on GBPUSD in the run-up to the September 18 vote."

US Dollar Forecast: More Gains to Come

The US Dollar retains a positive bias in global FX and there is little to argue against further gains.

When we consider the euro and pound we see poor competition this week.

Morgan Stanley say:

"We believe that the USD rally should continue, especially against the low-yielding DM currencies: CHF, EUR and SEK.

"US economic data continues to surprise to the upside and these surprises have diverged from the more negative data from the euro-area, supporting the USD.

"Over the medium term, once US capital demand increases at a faster pace than the increase of global savings into the US, US bond yields would increase. This is when the USD rally will broaden out."