Morgan Stanley
2026 FX Outlook: The Year of Pivots
LIVE20 November 2025USD bearish
FX Macro Quant
Morgan Stanley quantitative strategy signals and factor analysis
Key Insights for 2026
1H1 2026 favors carry and momentum strategies as Fed easing creates directional USD trends.
2GBP carry strategies offer the best risk-adjusted returns in G10 given low implied vol and high carry.
3JPY short-carry trades face significant reversal risk; size positions conservatively.
4EM carry remains attractive but election calendar (Hungary, Brazil) creates event risk pockets.
5V-shape DXY means momentum strategies may flip mid-year; dynamic allocation essential.
6Commodity ToT strategies benefit from base metals recovery and oil price stability.
Strategy Returns: Strong vs Weak Equity
Avg quarterly returns by equity quartile regime
Strategy Regime Sensitivity
Weak equity return vs strong equity return per strategy
Strategy Returns Heatmap
Color intensity represents return magnitude
| Strategy | Weak Q1 | Q2 | Q3 | Strong Q4 |
|---|---|---|---|---|
| G10 Carry: adjusted by volatility | +2.8% | -0.5% | +1.8% | +3.1% |
| Global Carry: adjusted by volatility | -3.2% | +0.3% | +1.2% | +2.8% |
| EM Carry: adjusted by volatility | +0.4% | +0.2% | -0.5% | +2.1% |
| Global Real Carry (core) | -2.6% | +1.2% | +1.5% | +1.8% |
| G10 Commodity ToT | -2.2% | +1.8% | +2.5% | +1.4% |
| G10 Equity momentum | -4.0% | -0.3% | +0.8% | +1.2% |
| 20 Liquid Momentum (Spot) 12M1M | +4.2% | -0.8% | -0.6% | +0.5% |
| Global carry + growth + value | +3.5% | +1.3% | +1.0% | +0.8% |
| Global composite Growth (EAS+FRI RV) | +4.0% | +0.1% | +1.6% | +0.6% |
| Global Commodity ToT | +1.5% | +1.8% | +1.0% | +0.5% |
| G10 Rates momentum | +2.2% | +1.8% | -0.3% | +0.2% |
| G10 Value REER PPI | -0.5% | +0.4% | -0.2% | +0.1% |
| Global Value REER PPI | +3.8% | +0.6% | +0.3% | -1.0% |
| G10 Growth (RV FRIs) | +4.8% | +0.5% | +0.8% | -1.1% |
| G10 Composite Growth (EAS+FRI RV) | +5.5% | +0.4% | +0.2% | -1.8% |
Strategy Profile
Absolute return magnitude
Live Market Context
EUR/USD
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GBP/USD
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USD/CHF
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USD/CAD
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