New Zealand set a mammoth 201 for four batting first at the Kia Oval, but England came agonisingly close to competing a record-breaking run chase only to fall short on 196 for five.
Even though he was “disappointed” England could not get the victory, Morgan was full of praise for the way his young side played.
He said: “The guys showed some great character throughout, it was a good batting wicket with a short boundary on one side and we felt it was a chaseable total.
“The guys showed some good form and we got off to flier at the start, but just couldn’t continue until the end, which was a bit of a shame. We were only two blows away from winning the game, it was very tight. The margin was very small.”
The loss came just days after England suffered a similarly close defeat in the final of the Champions Trophy to India, but Morgan insisted the feelings on this occasion were totally different to those at Edgbaston.
Morgan added: “Obviously it’s not as frustrating as the other day, that was a huge opportunity missed whereas this was a great performance with plenty of positives to take from it, and moving forward with the young guys that we have it’s a great prospect.”
England could be boosted by the return of Kevin Pietersen for the second clash against the Black Caps on Thursday.
Asked about that, Morgan said: “We’d obviously love to have him back. We’ll discuss where he fits into the side.”
New Zealand captain Brendon McCullum, who top-scored in the match with 68 off 48 balls, would relish the chance to face Pietersen.
He said: “He’s obviously a world-class player and if he comes back into the mix on Thursday then we’ll have to do a little more studying to try and come up with something to combat him.
“But the game’s better when Kevin’s back involved so it’ll be great from our point of view too if he does play.”