Deutsche is saying that amid the latest developments, there is a risk that major shifts in capital flow allocations take over from currency fundamentals. In turn, that will produce “disorderly” moves in the currencies market and trigger a confidence crisis in the US dollar. I’m guessing what they mean is the sort of thing we’re seeing with the price action so far today.
“We would caution that if the dollar decline accelerates, it would be a highly unwelcome development for global central banks. The last thing the ECB wants is an externally imposed disinflationary shock from a loss in dollar confidence and a sharp appreciation in the euro on top of tariffs. Expect pushback. We are in the midst of dramatic regime change in markets.”
Other notes from Deutsche in the past month:
- Euro continues to rise as Deutsche Bank questions the US dollar’s safe-haven status
- Deutsche Bank sees the most significant risk of global dollar de-dollarisation since WWII
This article was written by Justin Low at www.forexlive.com.
