Morgan Stanley analyst David Adams disagrees with the current bullish sentiment towards the US dollar in his report, which is driven by US economic growth and the promise of new tariffs by President elect Donald Trump's administration. He said that the market overestimated the impact of Trump's tariffs, and the new government's trade restrictions mainly focused on China, believing that now is the time to sell the US dollar and calling for buying the Australian dollar and British pound.

According to MarketWatch, Morgan Stanley believes in a report titled "Time To Sell" to its clients that people are overly optimistic about the future value of the US dollar.

(Source: MSN)

Although Trump has promised to impose a series of tariffs on major trading partners after taking office in January 2025, Adams said that most of the good news about the US dollar has already been reflected in current prices.

Adams pointed out that at this point, investors had basically digested the claim of excellent performance in the United States, which pushed up the value of the US dollar.

He also believes that investors may have overestimated the speed, breadth, and magnitude of the policies that the new Trump administration will implement.

They said, "Although trade policy announcements may be released relatively quickly, their implementation may be slower and narrower than many investors expect, with trade restrictions mainly concentrated in China

Although many investors expect the US dollar to continue to appreciate against currencies such as the pound, Australian dollar, and euro, Morgan Stanley's analysis suggests that this is not the case.

Morgan Stanley recommends investors to buy Australian dollars and British pounds, as they note that trade tensions have had a relatively small impact on these currencies and their current values are at historic lows. The bank expects the Australian dollar and British pound to appreciate against the US dollar.

They pointed out that the target price is $1.32 per pound and $0.675 per dollar. The bank's message to investors also stated that most of the "bad news" facing the euro has already been reflected in currency prices.

After Trump won the presidential election in November, the US stock market hit a historic high as investors expected him to implement tax cuts and tariffs that would benefit the economy.

The 'Trump Trade' swept through the market, causing the US dollar to soar.

Although investors are optimistic about Trump's promised tariffs, some economists suggest that this could lead to rising inflation and significantly increase prices for ordinary American consumers.

Some economists in the market still believe that these measures may lead to a one-time price increase, but will not result in sustained inflation.