Morgan Stanley expects the U.S. dollar to fall around 9% by the middle of next year, driven by slowing U.S. economic growth and aggressive Federal Reserve rate cuts. In a note dated May 31, via Bloomberg, gated, strategists led by Matthew Hornbach said the dollar could reach levels last seen during the COVID-19 pandemic, as financial markets shift into a new phase marked by steeper yield curves and a sustained downtrend in the greenback.

The bank forecasts:

• Euro to rise to 1.25 from around 1.13

• British pound to climb to 1.45 from 1.35

• Japanese yen to strengthen to 130 from 143

• 10-year U.S. Treasury yields to hit 4% by end-2025 before falling sharply as the Fed cuts rates by 175 basis points next year

Morgan Stanley joins other major institutions, including JPMorgan, in turning bearish on the dollar amid persistent trade tensions under President Trump. The euro, yen, and Swiss franc — all seen as safe-haven rivals — are likely to benefit most from dollar weakness.

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The USD has lost ground during the session here so far:

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