Great international bank cautions of possible dollar catastrophe
(MENAFN) Deutsche Bank has issued a warning about a potential crisis of confidence in the US dollar, citing growing investor unease following President Donald Trump’s announcement of sweeping new tariffs. The alert comes amid heightened fears of a global trade war that has shaken financial markets worldwide.
In a client note shared on Thursday and reported by Reuters, George Saravelos, the bank’s global head of foreign exchange research, said that unusual shifts in capital flows could disrupt currency markets. “There is a risk that major changes in capital flow allocations overshadow currency fundamentals, leading to disorderly movements in foreign exchange markets,” he wrote.
The dollar has taken a hit this week, dropping over 1.5% against the euro and yen, and more than 1% against the British pound. The slump follows Trump’s imposition of tariffs ranging from 10% to 50% on imports from a wide range of countries. Concerns about a global economic downturn have driven investors toward safe-haven assets.
Saravelos warned that a sustained decline in confidence in the US currency could have serious ripple effects, particularly for the eurozone. “The last thing the ECB wants is a disinflationary shock caused by dollar weakness and a rapid rise in the euro, on top of the impact of tariffs,” he explained.
The European Central Bank has reportedly raised concerns that US protectionist measures could destabilize inflation forecasts and complicate monetary policy.
Global financial markets have already reacted negatively: stock indices have dropped, oil prices have fallen, and bond yields have declined in anticipation of slower economic growth. Demand for safe-haven assets such as gold, the Swiss franc, and German government bonds has surged.
Other major financial institutions, including JPMorgan and Fitch, have echoed Deutsche Bank’s concerns, warning that the new tariffs could slash US GDP growth by as much as 1.5% and potentially drag other economies into recession.
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