Morgan Stanley Raises Year-End Forecast for Euro Versus Pound to 87 Pence

Morgan Stanley raised its year-end forecast for the euro against the pound as the U.K.’s efforts to reduce its budget deficit may crimp growth, while the European Central Bank focuses on damping inflation expectations.

“The euro’s fundamentals are improving and the U.K. faces many challenges as it tries to tighten fiscal policy,” Stephen Hull, London-based head of global currency strategy, wrote in an investor note dated yesterday. “The euro will likely be one of the strongest global currencies for the remainder of 2010.”

Morgan Stanley raised its fourth-quarter forecast for the euro against the pound to 87 pence from 83 pence, according to the note.

The pound was little changed at 85 pence as of 8:40 a.m. in London.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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