The U.S. dollar is losing strength, Deutsche Bank predicts a potential euro surge to $1.30.
G'day mate! buckle up, 'cause Deutsche Bank's got some bombshell news for ya.
The many reasons for the U.S. dollar's potential downfall, as predicted by Deutsche Bank's currency guru George Saravelos, start with the policies of the new U.S. administration puttin' pressure on the greenback.
'Fore Trump took office, the U.S. currency lost some serious value against the euro, around six percent in the past three months. But, Deutsche Bank ain't stoppin' there. According to 'em, that's just the beginning - the conditions for a significant dollar decline are now in place!
What's more, the euro's looking expecting to strengthen greatly, potentially reaching levels as high as 1.30 U.S. dollars - the highest since July 2008!
Currently, the euro was tradin' around 1.14 dollars mid-week. But, a week ago, it was worth more than 1.15 dollars, the highest since the summer of 2021.
Now, if things go as Deutsche Bank predicts, this would be the euro's highest level since July 2008, just before it briefly hit its all-time high of around 1.60 dollars.
Saravelos heads the renowned Deutsche Bank Research currency team in London, and he ain't mincing words. After revising his forecasts, he declared: "We now expect a structural downward trend for the U.S. dollar."
There's a laundry list of significant changes since the start of the year, with numerous elements erodin' the dollar's traditional heft. "The list of superlatives is long," writes Saravelos. "Consider the largest shift in U.S. trade policy in a century, the most significant turnaround in German fiscal policy since reunification, the most profound reassessment of U.S. geopolitical leadership since World War II" - just to name a few.
This shift marks the end of an era in which the U.S. dollar was highly valued due to the dominant position of the U.S. economy and its role as a leading currency and "safe haven."
'Cause demand for U.S. dollars was so high worldwide, the dollar's exchange rate was long above its purchasing power parity compared to other currencies. But, Deutsche Bank's forecasts indicate an end to that "higher for longer" dollar scenario.
For Germany, a further significant strengthening of the Euro against the Dollar has several important implications. Lower prices for imports from Dollar-related areas, a suppression of inflation, low interest rates, weakening market opportunities for German exporters in the important sales market of the USA, and cheaper travel to the USA are few examples.
Saravelos points out three factors that, over the long term, will contribute to a weaker Dollar - a decrease in foreign investors' interest in financing the USA's growing trade and budget deficits, a peak and subsequent reduction in foreigners' excessive US asset holdings, and a growing willingness outside the USA to utilize the room for higher government spending and deficits to support growth and consumption outside the USA.
However, with Trump's Administration, predictability has severely decreased. In a world of extreme uncertainty, market disruptions and regime changes remain high, says Saravelos. "Given the magnitude of political upheavals, we will remain open to adjusting our forecasts."
- Deutsche Bank's currency guru, George Saravelos, predicts a significant decline in the U.S. dollar, citing increasing deficits in the U.S. and strengthening of the euro as potential causes.
- The euro's value is expected to reach levels as high as 1.30 U.S. dollars, potentially marking its highest level since July 2008, according to Deutsche Bank's forecasts.
- Saravelos believes that a decrease in foreign investors' interest in financing the U.S.'s growing trade and budget deficits, a peak and subsequent reduction in foreigners' excessive U.S. asset holdings, and a growing willingness outside the U.S. to utilize higher government spending and deficits to support growth will contribute to a weaker U.S. dollar over the long term.
- With the Trump administration, predictability has decreased, and market disruptions and regime changes remain high, according to Saravelos, who states that in a world of extreme uncertainty, adjustments to forecasts may be necessary.
