Morgan Stanley Fixed-G10 FX Strategy Chase the Growth Rabbit-106884763

MMarch6,202409:35AMGMTGlobalIdeaG10FXStrategyMorganStanley&Co.Internationalplc++44207425-3518+44207425-6841ChasetheGrowthRabbitDavidS.Adams,CFA+1212761-5287USD'sfrustratingstabilityisexplainedbythebalancedforcesofStrategist+1212761-0407simultaneousUSequityandUSgrowthoutperformance.We'reDavid.S.Adams@morganstanley.com+44207425-9781neutralonUSDfornowbutthinkthattheUSD-positivegrowthandrateoutperformanceforceswilleventuallywinout.WestayWantingLowshortEUR/USDviaoptions.StrategistUSDhasbeencaughtbetween…Confuciussaid"ifyouchasetworabbitsyouwillWanting.Low@morganstanley.comlosethemboth."USDiscurrentlycaughtbetweentworoughlybalancedforcesofUSequityoutperformanceontheonehandandUSgrowthoutperformanceontheMorganStanley&Co.LLCother.Wefindthat,historically,thesetwoforcescombinedcreatechoppybutlowFXreturnsanddampenvolatility.AndrewMWatrous...USD-positiveUSgrowthoutperformanceontheonehand...UltimatelywethinkStrategistthatUSDwillchaseoneoftheserabbitsmorethantheother,andthemorelikelyAndrew.Watrous@morganstanley.comoneisgrowthoutperformance.ThestrongcorrelationofUStoRoWinterestrateshasmadeitmoredifficultforFXmarketstopriceinclearpolicydivergencethemes,ZoeKStraussbutpersistentgrowthdifferentialsshouldmakethisapparentovertime.Strategist….andUSD-negativeUSequityoutperformanceontheother:UntilthisZoe.Strauss@morganstanley.comtr...