Summary of Key Points from Morgan Stanley's G10 FX Strategy Conference Call Industry and Company Involved - **Industry**: Foreign Exchange (FX) Market - **Company**: Morgan Stanley & Co. International plc Core Insights and Arguments 1. **Bearish Outlook on USD**: The bearish case for the USD remains strong due to low carry-to-volatility ratios and limited upside from US rates, alongside potential political and macroeconomic risks [8][9][10] 2. **Comparison with Other Currencies**: The USD's carry-to-volatility ratio is unattractive compared to alternatives like GBP/CHF, making it a poor choice for carry-focused strategies [8][12] 3. **Market Pricing Adjustments**: Significant shifts in market pricing occurred after the July FOMC meeting, limiting further upside from US rate expectations [8][9] 4. **Asymmetric Downside Risks**: Policy and macroeconomic risks create asymmetric downside risks for the USD, with potential for a selloff even without a significant rise in US unemployment [8][21] 5. **Investor Sentiment**: There is little reason for investors to buy the USD, as common justifications for long positions are deemed insufficient [10][11] 6. **Fed Rate Expectations**: Economists expect the Fed to cut rates below 3% in 2026, which could further weaken the USD [9][10] 7. **Risk Skew**: The balance of risks around the USD is tilted negatively, with a higher likelihood of a downward move rather than an upward one [19][20] 8. **Trade Recommendations**: Suggested trades include maintaining long positions in EUR/USD and GBP/CHF while shorting USD/JPY, with specific entry levels and targets provided [25][27] Additional Important Insights 1. **Economic Activity Monitoring**: The company emphasizes the importance of monitoring economic activity data alongside labor market data, as a decline in activity could lead to USD selling despite stable unemployment rates [23][24] 2. **Long-Term Narrative**: For medium-term investors, the narrative towards a weaker USD remains strong, while near-term investors may find the negative carry associated with USD trades unappealing [25] 3. **Valuation Methodology**: The report includes a detailed valuation methodology and risks associated with the recommended trades, highlighting the importance of understanding the underlying factors influencing currency movements [26] This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of Morgan Stanley's current outlook on the USD and related currency strategies.