19.11.201911:30 Forex Analysis & Reviews: The dollar faces difficult times, while for the euro and the pound, the worst may be over

According to Morgan Stanley experts, the fall of the greenback may become one of the main trends in 2020.

They believe that the US currency will suffer from stronger economic growth outside the United States and a reduction in portfolio investment inflows into the country.

The bank's experts expect the pound, euro, and New Zealand dollar to strengthen against the US dollar.

"Leveling the differences in the growth rates of the European and American economies and improving the political situation in the Old World can lead to a rally of the euro against the US dollar," they said.

According to Morgan Stanley's forecast, the EUR / USD pair will complete the first quarter and 2020 as a whole at 1.16.

"The pound against the US dollar should rise sharply by the first quarter of 2020, as an orderly Brexit becomes a more realistic prospect, prompting foreigners to cut back on hedges in the British currency and invest in undervalued assets in GBP. A possible interest rate increase by the Bank of England will also begin to be put into quotes," the bank's strategists said.

According to their estimates, by the end of the first quarter of next year, the GBP/USD pair will rise to the level of 1.40.

Morgan Stanley also recommends buying the New Zealand dollar against the American namesake, as economic growth in China and around the world will accelerate.

The bank predicts that the NZD/USD pair will reach the level of 0.69 by mid-2020.

Analysts at Citigroup also hold a "bearish" view of the US currency.

They believe that a greenback may encounter the following obstacles:

1. A likely de-escalation in trade tensions between the US and China, which will lead to an improvement in sentiment towards commodity currencies and the euro.

2. The increasing political risks in the USA. The threat of impeachment to Donald Trump on the eve of the presidential election in 2020 is supposed to create significant problems for the economic agenda of the head of the White House.

3. The risks of a deeper global economic downturn.

"While it is appropriate to discard some of the most pessimistic scenarios for the prospects for economic growth in the United States, the risks for American activity and inflation remain offset. Given the limited capabilities of other central banks, only the Fed can provide significant monetary stimulus, which is likely to lead to a weakening US dollar," Citigroup said.

The latest statistical data on the eurozone suggests that the slowdown in business activity in the region has passed the lowest point, and such geopolitical risks as a trade war and a "hard" Brexit are weakening, according to Credit Agricole.

"Further reduction in interest rates and other measures to mitigate monetary policy in the EU are unlikely shortly after the ECB representatives emphasized that the Governing Council will pay more attention to the potential negative consequences of the incentive program," representatives of the financial institution said.

"Meanwhile, political risks in the United States are intensifying ahead of the 2020 presidential election. The Fed may take a break and until it cuts the interest rate. Also, the regulator decided to conduct additional long-term repurchase transactions to curb short-term dollar rates. All this can lead to an even weakening of such a greenback advantage as a positive percentage differential," they added.

The bank is awaiting the conclusion of the first phase of a trade agreement between Washington and Beijing in the coming weeks, as well as the damping of risks associated with the disordered Brexit after early elections in the UK next month.

This week, data on business activity in the eurozone for November will be published.

"Confirming that business sentiment in the region has improved can strengthen confidence that the worst for the single European currency is behind, and support its further recovery," Credit Agricole said.