Morgan Stanley anticipates the long-standing bearish trend for the US dollar will likely end by 2027, with the bank projecting a shift toward renewed dollar strength in the coming years. The investment bank expects the EUR/USD exchange rate to rise to around 1.27 by the end of 2025, supported by a global economic environment that reduces US dollar demand over the medium term. However, the analysts caution that starting in 2026, a new cycle of dollar appreciation could begin, driven by shifts in monetary policy, interest rate differentials, and the evolving global investment landscape.
According to Morgan Stanley, the US dollar’s recent weakness has been largely influenced by broad macroeconomic factors, including decreasing real US yields and fading safe-haven flows. As other major economies recover and central banks normalize policy, this has helped buoy the euro. Nevertheless, the bank believes these dynamics will eventually reverse—particularly by 2027—as the Federal Reserve again takes the lead in tightening policy, potentially pulling the dollar out of its multi-year decline and marking the end of the current long-term bear market.
Read more on EUR/USD trading.