One of Europe’s largest banks has warned that the U.S. dollar is at risk of losing its safe-haven status as Donald Trump moves forward with tariffs against China and key allies.
Deutsche Bank highlighted several early-year developments signaling a decline in the dollar’s appeal, with the currency weakening against both the pound and the euro despite tariffs that could fuel inflation in the world’s largest economy.
“We do not make this statement lightly,” said George Saravelos, Deutsche Bank’s global head of FX research. “But the speed and scale of global shifts are so significant that this possibility must be acknowledged.”
The bank pointed to a “weakening correlation” between the dollar and risk assets, as well as the strong performance of both highly volatile and more stable currencies.
Saravelos further noted that key measures of policy uncertainty are now rising faster in the U.S. than in other parts of the world. “This reflects broader policy disruption and unpredictability from the administration, particularly in trade policy and spending cuts.”
Despite this, the dollar strengthened against the Mexican peso and Canadian loonie, as Deutsche Bank warned that the 25% tariffs implemented overnight could push both of America’s key trading partners into recession.
Meanwhile, markets are betting that the Federal Reserve will cut interest rates at least three times this year, with forecasts suggesting the tariffs could shave $150 billion off U.S. economic growth in their first year.
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