Deutsche Bank warns dollar at risk for a broad 'crisis of confidence'

(Bloomberg) – The dollar runs the risk of a crisis of trust as the trade war of President Donald Trump has caused investors to accumulate US assets over the past decade, according to Deutsche Bank. “We are in the midst of dramatic regime change in markets,” George Saravelos, the bank’s world head of FX strategy, wrote in a note to clients. “Given the dramatic nature of the movements, we are increasingly concerned that the dollar is at risk for a broader crisis.” Saravelos’ remarks follow a dip in the Greenback in the wake of US President Donald Trump’s trading tariffs unveiled on Wednesday. The fear that increased global trading tensions will hit an already shaky US economy has increased the bets on further interest rate cuts of the Federal Reserve and the Bloomberg US Dollar Index on track for its worst day since 2022. Deutsche Bank says that further dollar drops are combined with a strongest market signal. The latter has not yet emerged, “it would be a very negative signal if it did,” he added. The bank issued a similar warning last month when it said the Greenback could lose its traditional status of safe quality, as world markets adapt to a new geopolitical order. “Our overall message is that the risk is that major shifts in capital flow awards take over currencies and that FX movements become disorderly,” Saravelos wrote. He also added that the dollar route increases the chance that the European Central Bank will lower interest rates in April, a probability priced by wider markets at about 90%based on the overnight interest rate weapons. This compares with about 70% Wednesday. “The last thing the ECB wants is an externally imposed disinflationary shock of a loss of dollar confidence and a sharp appreciation in the euro above rates. Expect a setback,” Saravelos wrote. The business news, market news, newsletters and latest news updates on live mint.