Morgan Stanley advises shorting the dollar, citing three main reasons. First, although the U.S. economy is robust, with a 2.8% GDP growth in Q3, these positive factors are already priced in. Second, the market may have overreacted to changes in trade policy, overestimating their speed and impact. Lastly, there is a divergence in monetary policy expectations; the market is conservative about the Federal Reserve's rate cuts but overly optimistic about overseas central banks, especially the European Central Bank.
December's key events, including the ECB meeting and the Federal Reserve's FOMC meeting, could significantly impact the dollar. Morgan Stanley suggests monitoring these events closely and adjusting dollar exposure accordingly.
