Morgan Stanley short EUR/USD targeting towards 1.14

• We remain short EUR/USD, targeting 1.14. The ECB continues to be dovish as it sees the current high inflation as transitory. This keeps eurozone nominal yields low while allowing inflation breakevens to rise, putting downward pressure on eurozone real yields to weaken the currency. At the same time, eurozone data have also been missing market expectations lately, consistent with our economists’ projection of growth momentum in the bloc moderating in 4Q
• This stands in contrast with the acceleration in US growth that our economists are expecting, which should also put downward pressure on EUR/USD

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