The Blubber

Deutsche Bank Warns: US Dollar’s Safe-Haven Status at Risk

The US dollar may be losing its traditional safe-haven role as global markets adjust to a rapidly shifting geopolitical landscape, according to Deutsche Bank AG.

“We do not write this lightly. But the speed and scale of global shifts is so rapid that this needs to be acknowledged as a possibility,” said George Saravelos, Deutsche Bank’s global head of FX strategy, in a client note. “It is hard to overestimate the scale of change taking place in global economic and geopolitical relations in a matter of days.”

A Surprising Dollar Slump

Deutsche Bank’s concerns come after a sharp decline in the US dollar on Tuesday, which caught investors off guard. A broad index tracking the greenback fell as much as 0.7%, despite the US pushing ahead with new tariffs—a move that many had expected to support the currency.

“What stands out in today’s market reaction is that the dollar is not strengthening materially,” Saravelos wrote. “We would not have expected these market moves at the start of the year.”

Key Factors Behind the Dollar’s Shift

Saravelos pointed to a weakening historical correlation between the dollar and risk assets, as well as the growing US current account deficit, which has often signaled the limits of dollar overvaluation.

For now, Deutsche Bank is taking a neutral stance on the dollar but is monitoring signs of a broader weakening trend.

Trump’s Security Pullback and the Euro’s Resurgence

Another major factor is the European Union’s efforts to ramp up defense spending, following President Donald Trump’s abrupt withdrawal of US security support in Europe.

Last week, Deutsche Bank dropped its long-standing bearish outlook on the euro, reflecting how global realignments are reshaping currency markets.

“Bringing it all together, we are starting to become more open-minded to the prospects of a broader weaker trend unfolding for the dollar,” Saravelos said. “Two pillars of America’s role in the world are being fundamentally challenged: the US’s security backstop for Europe and the respect of rules-based free trade.”