LIVE MARKETS-Expected dollar weakness this year seems like deja vu to Morgan Stanley

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

EXPECTED DOLLAR WEAKNESS THIS YEAR SEEMS LIKE DEJA VU TO MORGAN STANLEY

Economists at Morgan Stanley expect the dollar to underperform this year, laying out current market conditions that mirror 2017 - the first year of Donald Trump's initial stint in the White House - where the greenback had come under pressure.

In a note dated February 24, Morgan Stanley said that there were three main drivers for the dollar's declines back in 2017, with the dollar index =USD having fallen nearly 10% that year.

The U.S. being slower than anticipated in raising tariffs, the global economy growing faster than what was expected at the start of the year - which raised the attractiveness of assets outside of the United States - and EU-skeptic political parties generally underperforming are the reasons MS highlights.

The Wall Street brokerage estimates that something of the sorts will likely weigh on the dollar in 2025 as well.

Starting with trade policy, MS expects tariffs on China and European Union products to rise gradually. In general it sees the Trump administration using a twin-pronged strategy - to leverage tariffs as a negotiation tool and "as a means of achieving longer-term security goals consistent with supply chain security and reducing trade deficits."

"In our view, the USD has likely declined recently in part because investors expected and had positioned for even more tariff escalation than measures announced since January 20," according to Morgan Stanley.

On the global growth side, MS says their growth forecasts are similar to the market consensus and that represent "a neutral or slightly negative factor for the USD this year."

Lastly, political action in Europe back in 2017 reduced the negative risk-premium for the euro, with elections in Netherlands, France and Italy seeing the right-wing underperforming.

This year, conservatives led by Friedrich Merz claimed victory in the German elections, which boosted European equities and the euro.

As of Tuesday, the dollar index is down roughly 2% for the year after rallying more than 7% in 2024.

(Shashwat Chauhan)

FOR TUESDAY'S EARLIER LIVE POSTS:

TWO-FER TUESDAYS: CONSUMER CONFIDENCE PLUNGES, HOME PRICES BLIP HIGHER - CLICK HERE

WALL STREET FALLS AS SLOWDOWN FEARS, POLICY UNCERTAINTY - CLICK HERE

STERLING STAGFLATION STRESS? - CLICK HERE

GERMAN ELECTION: A NEW POSITIVE CATALYST FOR UTILITIES - CLICK HERE

GERMAN VOTE MIGHT KEEP EUROPE PROFIT TAKING AT BAY CLICK HERE

"SOLID" EARNINGS SEASON IN JAPAN - GS - CLICK HERE

STOXX STEADIES, QUESTIONS OVER UNILEVER - CLICK HERE

EUROPE BEFORE THE BELL: CHIPS AND DEFENCE FOR BREAKFAST - CLICK HERE

SEA OF RED AS US-CHINA TECH WAR RATCHETS UP - CLICK HERE