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Morgan Stanley's latest G10 scorecard favours the Australian Dollar and Scandi currencies over the Pound.
Morgan Stanley has published its latest G10 currency scorecard, assigning each major currency a view and a directional skew, and the standout feature is how few conviction calls remain: only the Australian Dollar and Swedish Krona earn outright bullish ratings, while the Pound, Dollar and Yen all carry bearish skews.
Here is the full rundown.
US Dollar – View: Neutral | Skew: Bearish
"Data continue to demonstrate that Fed rate hikes are unlikely, but a shift in market pricing – and a further decline in the USD – may require a clear dovish pivot at the September FOMC," says Morgan Stanley.
Euro - View: Neutral | Skew: Bullish
The Euro benefits from expected Dollar weakness, but the bank says overly-hawkish ECB pricing and an expected increase in election risk premium "make EUR an attractive funder on crosses."
Japanese Yen – View: Neutral | Skew: Bearish
"While the market is pricing in a sharper BoJ rate hiking cycle, USD/JPY could trade higher on the back of strong global risk sentiment and elevated US terminal rate pricing despite a modest US inflation print," says the bank.
Pound Sterling – View: Neutral | Skew: Bearish
"We expect GBP to be a medium-term laggard from a dovish BoE pivot, but that will take time to play out, and its reasonably high carry may help support it versus low-yielding peers in the interim," says Morgan Stanley, a call that chimes with the wage-driven downside risks we covered this week.
Swiss Franc – View: Neutral | Skew: Bullish
The bank turns neutral on the Franc after low volatility, a softer July CPI and SNB intervention risk took its short EUR/CHF trade near its stop, though it retains the position on the expectation that purchasing-power dynamics weigh on the pair, "but slower than we expected."
Canadian Dollar – View: Neutral | Skew: Bullish
"A deal before Wednesday's 338 tariff deadline would lift CAD; without one, we think USD/CAD heads toward 1.41. Fundamentals are improving either way," says Morgan Stanley, with the tariff deadline dominating our Canadian Dollar week ahead call.
Australian Dollar – View: Bullish | Skew: Bullish
The scorecard's strongest conviction: "We stay bullish AUD after Governor Bullock's hawkish tone in August. Carry is high, implied vol unusually low and risk appetite firm, so we look for 0.75 in the coming quarters."
That reading emphasises the hawkish document over the dovish market reaction that followed the RBA's unanimous August hold.
New Zealand Dollar – View: Neutral | Skew: Neutral
The bank sees AUD/NZD holding near 1.20, noting inflation expectations have cooled and, with unemployment rising and a September hike fully priced, risks skew lower into the next card spending data.
Swedish Krona – View: Bullish | Skew: Bullish
"SEK is the cleanest and best expression of a cyclical global growth rotation," says Morgan Stanley, adding that with positioning below the 30th percentile there is ample scope for a downside surprise in EUR/SEK.
Norwegian Krone – View: Neutral | Skew: Bullish
The Krone is a natural beneficiary of its high carry and energy exposure, but the bank flags long positioning and stable energy prices as clear risks, with NOK/SEK facing support at 0.98 and resistance at 1.0170.
The common thread across the ten calls: carry and risk appetite are doing the work while central banks pause, which leaves the September FOMC as the event with the power to redraw the entire card.
