Morgan Stanley predicts euro-sterling parity in 2018


Morgan Stanley says Brexit-related turbulence will push the pound lower this year before it hits parity with the euro in the first quarter of 2018.

It adds a strengthening eurozone will contrast with softening data out of the UK, the Financial Times reports.

It predicts the euro will trade at £1.02 by the end of Q1.

The weaker UK economy will be driven by “unsustainable” household spending funded by unsecured lending, negative real wage growth and lacklustre productivity growth, the bank says.

Brexit will deliver uncertainty that will weigh on business investment, while sterling weakness will continue its failure to boost net export growth.

At the same time pension funds and insurers will reverse their historically low exposure to the eurozone.